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India

With Lesser Mileage, As Ethanol Blending Increases in Petrol, Price Doesn’t Decrease

The government has amended the National Policy on Biofuels – 2018 recently which inter-alia envisages a target of 20 per cent ethanol blending by 2025-26.

Ethyl alcohol is a combustible liquid that is also less polluting than fuels like petrol and diesel. (Image used for representational purpose only)
Ethyl alcohol is a combustible liquid that is also less polluting than fuels like petrol and diesel. (Image used for representational purpose only)

The Government of India has been repeatedly saying that it would be increasing the quantity of ethanol in petrol. Having started with a 5 per cent blend, the ethanol content in the petrol right now stands almost at 10 per cent.

“The government has amended the National Policy on Biofuels – 2018 recently which inter-alia envisages a target of 20 per cent ethanol blending by 2025-26. This policy aims to promote biofuels across the country including ethanol production,” the government said on July 29 in Lok Sabha.

However, with the increased blending of ethanol, will the fuel prices decrease? This yet remains to be seen.

What Is Ethanol?

It is a biofuel made purely out of organic material that largely includes plant products like corn or sugar cane which later is fermented and converted to ethanol. The process is much like making wine. Ethanol is nothing but ethyl alcohol itself.

Ethyl alcohol is a combustible liquid that is also less polluting than fuels like petrol and diesel. In line with the Paris agreement where India has pledged to reduce its carbon footprint by 33 to 35 per cent by 2030 when compared to its 2005 levels, the Indian government is seeing ethanol as a go-to option.

Usability Challenges

Explaining the uses of ethanol and its adaptability, the editor of the PowerDrift automotive magazine Shubhabrata Marmar says that technology to incorporate ethanol “is not something revolutionary”.

However, he says that the adaptation of ethanol as a fuel may be a challenge more for auto manufacturers than the users. He says that normal petrol engines which are dominating the market today are fine to use the 5 to 8 per cent blend. Yet, in the coming years, if the government intends to increase the ethanol content to 1/5 of a litre level, redesigning of the engines may be needed.

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Niti Aayog has seconded this. In its report, discussing challenges to increasing ethanol concentration, it says “vendors (have) to develop ethanol compatible parts and optimization of engine for higher ethanol blends (is needed).

Petrol Price, Ethanol Blending, And Lesser Mileage

As the blending of ethanol content in petrol increases, the actual cost of a litre for OMCs gets lower. For example, a litre of petrol costs rupees 100, and this ideally is when there is no amount of ethanol mixed with it.

Now, when one-fifth of the litre is ethanol, the price for this fifth part should also be assigned on basis of the price of ethanol, not on the basis of the crude market rates of oil or petrol rates in the international market.

According to cabinet approval, the fuel-grade ethanol largely produced from sugar cane is priced around rupees 63. This is way lesser than petrol. Even at this time, according to the government’s own statements, nearly ten per cent of ethanol is present in petrol being served across the country.

While ethanol costs very less as compared to petrol, little more than half of its price, to date no credible decrease in petrol prices has been seen on account of the increased blending. Neither are there any choices for the consumer whether to choose an ethanol blend or pure petrol.

In the United States (US) according to the directions issued by the Office of Energy Efficiency and Renewable Energy, “As of 2011… allowing the use of (ethanol), pumps dispensing it must be labelled. A vehicle’s owner manual may indicate the maximum ethanol content recommended for it by the automaker”.

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There has been to date no such direction issued by any Indian government agency towards oil manufacturing companies (OMCs). Research by the Environment Protecting Agency (EPA) of the US government has suggested that “ethanol contains about one-third less energy than gasoline”. This means that the vehicles poured with ethanol will ideally deliver lesser mileage per litre than pure petrol.

Concerns are also being raised that switching to higher ethanol blends will consume more agricultural land where crops like sugar cane and corn are to be cultivated to make ethanol. Yet one of the main points remains the pricing. While a 10 per cent blend is already being served, the government has never showcased how this biofuel is reducing India’s petrol costs for consumers.

The experts do say that the total quantity of crude oil to be imported may be lessened in the long run but price benefits toward the last consumer are unspoken of. On increased blending, no price cuts have been announced, and in almost all the answers to date, the government has exempted itself from having any role in the pricing decisions of petrol.

“Public Sector Oil Marketing Companies (OMCs) have been taking an appropriate decision on pricing of petrol and diesel on the basis of international product prices and other market conditions. The OMCs have increased and decreased the prices of petrol and diesel according to changes in international prices and the rupee-dollar exchange rate,” this has been the standard answer of the government in Lok Sabha for years.

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On the other hand, the government has suggested that ethanol as a whole has witnessed a “tenfold increase” in consumption in India in eight years. PM Modi on Thursday said that the quantity of it mixed with petrol has increased from 40 crore litres before 2014 to 400 crore litres today. The blending of ethanol with petrol has also increased the income of farmers, he said addressing a large gathering in Gujarat.

Meanwhile, what is being promoted as a pro-farmer venture, at the same time requires a lot of land. The US ethanol program is an example where food crises were witnessed given the expansion of ethanol production using corn.

Also, experts are arguing that India which has a great sugar export potential will be becoming ‘uncompetitive’ when it diverts the use of the same sugar to ethanol production.

At the same time, to produce any ethanol which can be sufficient for industrial uses, plants for distilling and producing the same are needed. The cost of setting up a second-generation plant costs over 1000 crore. These too experts say will be a challenge.

However, as per the government, oil manufacturing companies have already signed agreements with 131 ethanol units across the states but the major suppliers in this are reportedly the sugar industries who as per reports contribute more than 50% of total ethanol supplies.

In addition to this, the surplus ethanol is only produced by three states including Uttar Pradesh, Maharastra, and Karnataka which is used for blending. Most other states are reportedly in deficit production of ethanol.

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