Government moving towards market pricing of ethanol for India’s energy security

In an attempt to boost the usage of ethanol in India’s energy mix, the National Democratic Alliance government will move towards market pricing of ethanol used for blending with petrol, oil minister Dharmendra Pardhan said on Wednesday.

Ethanol is a pure form of alcohol, and can be produced from agricultural produce such as sugar cane and corn. Blending of ethanol with petrol will lower the requirement for crude oil, which accounts for the largest foreign exchange expenditure for India. The strategy also has the potential to help farmers with the country often facing sugarcane oversupply.

“In future, we will move towards market dynamic pricing system for ethanol,” Pradhan said at a bio fuel conference in New Delhi.Presently, the government fixes the price of ethanol and has permitted state run oil marketing companies (OMCs) to sell ethanol blended petrol with percentage of ethanol up to 10%. The delivered price of ethanol was fixed in the range of Rs.48.50 per litre toRs.49.50 per litre for last year.

“There is a large potential of bio-fuel business in India to grow from present Rs.6,500 crore to Rs.1 lakh crore in the next 10 years,” Pradhan said.The market pricing plan for ethanol comes in the backdrop of OMCs struggling to achieve 5% ethanol blending target across the country. During 2014-15, OMCs reached 2.3%, with the government confident of achieving 4% blending target during the current year. The Narendra Modi-led National Democratic Alliance government aims to halve India’s energy imports by 2030.

“Prime Minister has set a target of 10% import reduction in crude by 2022 and bio-fuels can play an important role in achieving the target. Shifting the fuel consumption profile to bio-fuels derived from domestic feed stocks would lead to decrease in this dependence on crude oil imports,” Pradhan said.

India imported 202.85 million tonne (MT) of crude oil in 2015-16 for Rs.4.16 trillion, according to Petroleum Planning and Analysis Cell, which works under the ministry of petroleum and natural gas. For 2014-15, India imported 189 MT of crude oil at a cost ofRs.6.87 trillion.

“The Bio-fuel Programme has the capacity to provide better remuneration for farmers, address environmental concerns, reduce dependence on imports and help in foreign exchange savings,” Pradhan added.

India’s hydrocarbon production is stagnant. The government has made energy security one of the primary areas of focus in its economic policy in order to achieve fast and sustainable long-term development.

Speaking at the same conference, power, coal, new and renewable energy and mines minister Piyush Goyal said that the government will soon come up with a Jeevan Spardhacompetition “to brainstorm and devise innovative technologies and novel ideas to integrate the use of bio-fuels in the lives of the common man.”

This comes at a time when the government is providing special incentives, such as easy financing and tax concessions on gains, to companies under the Startup India scheme.

In order to resolve India’s energy security concerns and to meet the growing energy needs, a national policy on biofuels was announced in December 2009. The policy primarily envisaged development and utilisation of indigenous non-food feed stocks raised on degraded or waste lands, spurring research and development on cultivation, processing and production of biofuels and a blending mandate of 20% ethanol and biodiesel by 2017.

State run firms—Indian Oil Corporation, Bharat Petroleum Corporation Ltd, Hindustan Petroleum Corporation Ltd and Numaligarh Refineries Ltd have identified 10 locations for setting up second generation ethanol plants at an estimated investment of Rs5000 crore.

Also, private sector companies such as “CMC Bio-refineries, Praj Industries Ltd., Munzer, Novozymes and Shell have also announced an investment of Rs.5000 crore in the field of Bio-fuels,” the petroleum and natural gas ministry said in a statement.

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