From Fields to Fuel: The Indian Sugar Industry’s Role in Advancing Ethanol Blending

The Indian sugar industry is undergoing a transformation as it embraces ethanol production, positioning itself as a key player in the nation’s renewable energy landscape. With the government's push for sustainable fuel alternatives, the blending of ethanol with petrol is gaining momentum, promising to reduce dependence on fossil fuels and enhance energy security. This initiative aims to support the agricultural sector by providing sugarcane farmers with a stable income and addresses environmental concerns by lowering greenhouse gas emissions. As India strives for energy independence, the sugar industry stands at the forefront of this crucial transition.

Ethanol: A sustainable alternative

India's energy demand is rapidly increasing due to economic growth, a rising population, urbanisation, evolving lifestyles, and higher disposable incomes. Currently, about 98% of fuel for road transportation comes from fossil fuels, while only 2% is from biofuels. The country imports around 85% of its oil needs, with petroleum imports reaching 185 million tons at a cost of US$ 551 billion in 2020-21, primarily for transportation.

Domestic biofuels, specifically ethanol, is a strategic opportunity to reduce dependence on imported fossil fuels. Ethanol, being produced through the fermentation of sugar, is a versatile alternative source of energy with various industrial and medical applications. Brazil is the market leader in the western hemisphere and India is the market leader in the eastern hemisphere for the sugar market. Being the third largest global ethanol-producing country after USA and Brazil, India is focused towards achieving green energy transition. The ability of this policy to address domestic sugar surpluses while reducing imports of fossil fuels is one that will help achieve India's COP 26 target. It is remarkable that India's ethanol blending percentage has grown from 5% in 2019-20 to 12% in 2022-23, while production has gone up from 173 crore litres to over 500 crore litres in the same period. The implementation of the E20 program that aims for a 20% blend of ethanol with petrol by 2025 could save India around US$ 4 billion annually, while reducing pollution and maintaining efficiency comparable to petrol. With abundant arable land, increasing food grain, and sugarcane production, India can become a prime target in this regard. The government itself is supporting this transformation process through incentives and regulatory frameworks as it promotes energy security and a clean environment.

The ethanol demand in India

Demand for ethanol as fuel in India is driven by blending mandates, wide availability of ethanol-blended fuel, and the suitability of the vehicle for such fuels. India has a large population of vehicles; there are approximately 220 million two and three-wheelers and 36 million four-wheelers. Two- and three-wheelers account for 74% of this total, consuming two-thirds of gasoline by volume, while four-wheelers make up 12% and consume the remaining one-third. The growth rate for vehicle registrations in these segments is projected at 8-10% annually. With the current gasoline consumption of 698 crore litres in FY24 and the assumed blending targets, the likely demand for ethanol would grow to 1,016 crore litres by the end of the ethanol supply year FY26. This, therefore, puts emphasis on ethanol in India's fuel strategy and its potential role in enhancing energy security and curbing emissions.

NITI Aayog, E- estimated

Ethanol blending benefits

• Impact on environment : Ethanol blending has cut carbon emissions substantially, resulting in a reduction of around 5.44 million metric tons of CO2, in support of India's climate goals and commitments to sustainable development. As a cleaner-burning fuel, ethanol improves air quality and lowers health risks from pollution. In India, vehicular emissions of Carbon Monoxide (CO), Hydrocarbons (HC), and Oxides of Nitrogen (NOx) are regulated, and ethanol-blended gasoline has been found to cut these emissions. For example, two-wheelers will have Carbon Monoxide emission decreased by 50% and four-wheelers by 30%, and Hydrocarbon will be down by 20% than regular gasoline. Unregulated carbonyl emissions such as acetaldehyde is higher with ethanol blends but minor as compared to regulated emissions. In total, blending of ethanol provides an opportunity for a reduction of emissions from two- as well as four-wheelers, with clean transportation being promoted.
• Boosting agricultural income : Over the last decade, the government has allocated around Rs. 87,558 crore (US$ 9.98 billion) to farmers involved in ethanol production, boosting rural economies and improving livelihoods. Through this scheme, the diversified income generation of farmers diminishes their vulnerability to changes in sugar prices and increases their financial stability. By engaging in ethanol production, farmers can ensure an economic future while contributing to renewable energy in the country.
• Foreign exchange savings : The ethanol blending program has generated significant foreign exchange savings for India, amounting to approximately Rs. 1,06,072 crore (US$ 12.67 billion) over the past decade. This has been achieved by reducing crude oil imports through increased domestic ethanol production. This achievement is particularly important given India's heavy reliance on imported oil. Additionally, the program has substituted around 1.81 million metric tons of crude oil, easing the pressure on foreign reserves and bolstering energy security. By promoting domestic ethanol production, India is enhancing its energy independence while achieving substantial economic benefits.
• Future economic potential : The seriousness of developing renewable energy projects can be ascertained from India's aim of 20% ethanol blending in the 2025-26 budget. Economic and environmental benefits from blending percentages are much more when it exceeds E85 or E100. When the investment and policy support will be in the right proportion, India will remain the front runner for rest of the world in the case of biofuels.

Government policies and initiatives to support ethanol blending

• Ethanol Blended Petrol (EBP): The EBP program forms an integral part of the approach India is adopting towards making ethanol a constituent part of its fuel mix. Starting in 2003, the program has really seen significant strides over the years, as the government moved the goal date from 2030 to achieve 20% blending of ethanol in petrol by 2025. This would increase energy security, reduce reliance on imported fossil fuels, and be a sustainable energy proposition. Interestingly, the blending percentage has increased from 1.53% in 2014 to around 15% in 2024, which is a significant achievement towards the target and reflects the success of the program in changing the fuel landscape of India.
• Policy revisions for feedstock usage: For an enhancement in ethanol production, feedstock policies have been reformed. Since November 2024, besides the usage of B-heavy and C-heavy molasses, sugarcane juice and syrup also were permitted for ethanol manufacturing. Raw materials will vary as well, but sugar mills will have options for various feedstocks sources that is likely to strengthen the capacity to produce. The government intends to expand the input range for ethanol production, thus strengthening the biofuel sector and supporting sustainable energy initiatives.
• National Policy on Biofuels (2018): Biofuel National Policy establishes an integral framework for the production as well as use of biofuels, including ethanol. The policy promotes diversified usage of feedstocks like sugarcane juice, sugar syrup, and damaged food grains for enhancing the level of ethanol production. These will then help to increase availability largely for blending purpose by ensuring fewer supplies of imported fossil fuels into the country.
• Sustainable Supply: The Indian government will extend the ban on sugar exports for the second year running due to lower-than-expected cane production. In this context, it intends to raise the procurement price of ethanol from sugar mills to boost biofuel supplies. The plan will help achieve the Indian government's ambition to boost ethanol's share in gasoline to 20% by 2025-26, up from the current 13-14%. Additionally, the government has allowed sugar mills to use cane juice for ethanol production, reflecting efficient resource management amid fluctuating sugar supplies.

Conclusion

The Indian sugar industry is ready to lead the drive for further progress of ethanol blending initiatives toward nation energy security and environmental sustainability. Thus, addressing challenges in food security, water resource management, and infrastructure will get the industry set for its sustainable future. This, coupled with the demand for clean fuel alternatives, will be the push from the government for India to reduce its reliance on imported fossil fuels. As the country pushes for a 20% ethanol blend by 2025, the sugar sector will not only ensure a stable income for farmers but also pave the way for a greener economy that would, in turn, benefit society and the environment.