New Delhi: According to India Ratings and Research, the ethanol-blending rate in India is likely to touch almost 14 per cent in 2024. That’s an increase from 12.1 per cent in 2023 and 10 per cent in 2020—much short of the government’s target of 15 per cent, despite the government’s restriction on the use of sugarcane-based ethanol, reports The Economic Times.
Ind-Ra said that the reduced supply of ethanol from sugarcane would be offset by a sharp rise in ethanol produced from grains, largely maize, as the government curbs on the diversion of sugar for ethanol. Production of grain-based ethanol rose by 220% in the first seven months to August 2024 to 1.8 billion litres, contributing about 60% to the total supply.
Demand for ethanol to blend with petrol increased by 19% in the first nine months of 2024, totalling 4.8 billion litres. This pushed the blending ratio to 13.3%, up from 11.6% during the same period last year. While this is still below the government’s 15% target, the blending rate has exceeded 15% since May 2024, largely due to the increased production of ethanol from grains.
Ind-Ra noted that the government’s goal of reaching a 20% ethanol blending rate by 2026, which would require around 10 billion litres of ethanol, is ambitious due to challenges like the availability of raw materials and vehicle compatibility. However, Ind-Ra predicts that even with a 16%-17% blending rate, the ethanol sector could see significant growth, potentially reaching around 8 billion litres by 2026.
The government imposed restrictions on using sugar for ethanol due to an expected drop in sugar production, which is forecasted to decrease to 33.5 million tonnes in 2024 from 37.2 million tonnes in 2023. These restrictions have led to a sharp decline in sugarcane-based ethanol production, which dropped to 1.75 billion litres in the first seven months of 2024, down from 2.5 billion litres during the same period last year.
To support the ethanol program, the government has raised ethanol prices from all sources between 2017 and 2023. For 2024, the price of maize-based ethanol was increased by ₹5.8 per litre to ₹71.9 per litre to boost profitability and encourage production. However, profits from grain-based ethanol remain uncertain, affected by market demand and changes in raw material prices.
Looking ahead, Ind-Ra expects the government might ease restrictions on using sugarcane for ethanol in 2025, given the higher-than-expected sugar production and stock levels. However, the agency believes that grain-based distilleries will continue to lead the growth in ethanol production, with capacities expected to rise to 6.5-7.5 billion litres by 2026-27, potentially meeting 60% of the total demand for ethanol in fuel.
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