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Indian Ethanol Scenario - Opportunities & Challenges

Indian Ethanol Scenario - Opportunities & Challenges. by Jai Uppal, Consultant B.Sc. Chem. Engg., M.S.E. (Michigan, USA) F.I.E.. L.M.I.I.Ch.E., L.M.I.M.A. (Advisor -Renewable Energy) ( Winrock International India) jaiuppal @ yahoo.com (M)+919811171121 Petrofed – April 13, 2006.

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Indian Ethanol Scenario - Opportunities & Challenges

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  1. Indian Ethanol Scenario -Opportunities & Challenges by Jai Uppal, ConsultantB.Sc. Chem. Engg., M.S.E. (Michigan, USA)F.I.E.. L.M.I.I.Ch.E., L.M.I.M.A.(Advisor -Renewable Energy)(Winrock International India) jaiuppal @ yahoo.com (M)+919811171121 Petrofed – April 13, 2006

  2. Indian Scenario – Historical • The Indian Ethanol Program started during World War II - there was a shortage of petrol (gasoline) & ‘Power Alcohol’ was encouraged by the British. • The ‘Oil Shock’ of mid 70s saw a revival of interest in Ethanol.Successful trials in 1979 - IOC/IIP on 15 cars found Ethanol (10% & 20% blends) suitable • Large number studies, reports, trials

  3. Indian Initiatives • Finally (April 2001) 3 successful Pilot Projects using E5 – 2 Maharashtra & 1 UP – mixing at oil depots and supply to nearly 300 petrol pumps with supply from U.P. – 1500km • Announcement of December 10, 2001 • Policy announced to blend 5% ethanol with petrol • Inter Ministerial Task Force constituted • Rs 4 Cr.(US$ 1 Mill.) for R&D on Ethanol diesel blends • Amend Sugar Development Act for financing Ethanol • Announcement of March 20, 2002 • Dr SJ Chopra Technical Committee Report - Ethanol most appropriate oxygenate for India

  4. Indian Initiatives • Auto fuel Policy of August 2002 • “ The development of technologies for producing ethanol and bio-fuels from different renewable sources can play a major role in commercialization of bio-fuels vehicle in the country, which should be encouraged by providing R&D & other support through suitable fiscal incentive.” • September 13, 2002 Notificationmaking 5% Ethanol blending in gasoline mandatoryin 9 States (Sugar producing States)& 4 UTs by January1,2003 - a notice period of just 3.5 months.

  5. Indian Initiatives • Amendment to the Sugar Development Fund to enable access to fund for producing Ethanol from Alcohol at interest rate of 6% - 2002. • Budget of Feb 2003 -Excise duty concession of Rs 0.30 per litre valid till Feb 29, 2004 – year to year validity

  6. Indian Initiatives • Program Operated in FY 2003-04 –290 mill L Ethanol blended in 5.8 bill L of petrol in 9 States • ED incentive lapses March 2004 and oil Companies stop purchases • Draught & shortage leads to price rise of molasses/Ethanol in Maharashtra, Karnataka, AP etc. Oct 2003 onwards • No other Feedstock developed • ED incentive not taken up the interim budget of Mid 2004 & not introduced in any subsequent budget – after New Government takes over

  7. Indian Ethanol Status • Notification regarding mandatory provision made conditional with new notification Oct 2004– blending subject to availability, market forces & import parity price • ED incentive again not introduced in Feb 2005 and in Feb 2006 • MOU in 2005 of Oil Cos. with ISMA as nodal body representing Ethanol Manufacturers to start the program and price fixed at Rs. 18.75 per litre

  8. Indian Ethanol Status • Task Force set up to study the Ethanol Blending Program • Tenders again floated in December 2004 kept pending • At present Blending on in UP, Punjab, Karnataka, Tamil Nadu (partial). • Price of crude touches above $60 a rise of 6 times since end of 90s but not ready to give any increase to Ethanol manufacture • Imports of crude rise to $ 44 billion 2005-06 (70% import)

  9. Indian Ethanol Status • More than 300 units with total installed Alcohol capacity is 3.5 billion L with 40% to 45% utilization before Ethanol was introduced. Main use of alcohol was Potable and ABC.The health of independent alcohol units was not good. • Substantial Progress made - nearly 1500 mill L Ethanol capacity built up since 2003 with an investment of About Rs 10,000 mill. This capacity can meet the demand of 15% blend.

  10. Challenges • Vision and policy lacking in for Renewable Biofuels • Important because with imports of crude oil at nearly $44 billion and BOP becoming increasingly adverse at an average of less than $60/bbl • It has been predicted that Indian economy will be seriously jeopardized if prices go above $80. • With announcement of Iran on Uranium enrichment on April 11, 2006 the prices will harden. • Any pre-emptive action or political instability can easily push the prices to $ 100 barrier • Investment in Biofuels is a risk management option

  11. Challenges • Catch 22 situation • Low capacity (adverse economies of scale)due to low demand – higher cost of production. • Policies regarding sugarcane limiting direct use of sugarcane for Ethanol • Changing policies regarding land holding limit the potential • Open / liberal policies of State Governments regarding movement of alcohol and feedstocks • Increase coordination between stakeholders

  12. Drivers for Brazilian & US Ethanol Program • Energy Security, Rural Employment & Environment • USA • Provides excise incentive to Ethanol -US$ 0.50 per gallon • Banning of MTBE & replacement with Ethanol as oxygenate mandatory • Brazil • does not provide any subsidy to Ethanol Program as it is competitive to Gasoline if crude oil price is US$ 26 per bbl because of competitive cane prices – 50% of Indian Prices. • Mandatory blending of 20 to 25% of Ethanol with petrol

  13. Ethanol Potential in India • The ethanol program in India is dependent on molasses from sugar industry – major constraint • India has lots of rotten and out of date food grain. • 4 mill tonnes of grains can produce 1.5 bill L of Ethanol per year • Sugar occupies about 4 mill ha of land which is less than than 7% irrigated land • An increase of 1 mill ha will produce 75 mill T of sugarcane that can give additional 5.0 bill L of Ethanol • This can also be achieved by raising the yield to 100T/Ha

  14. Ethanol Potential/Benefits - India • Once Biomass to Ethanol is commercialized it can become a source of almost limitless source of Biofuels. • Ethanol with a consumption of 4 to 5 Bill. L (20-25% blending by 2015) • Can have a retail turn over of Rs 140,000 million per year • Export Potential of 4 to 5 bill L. • Total Potential of Ethanol – 10 bill. L by 2015 • India has developed alcohol technology which is sold all over the world – dehydration technology licensed

  15. Benefits to Indian Economy • Enhancing Energy Security – management of risk • Rural employment and development of economy • Large multiplier/low capital intensity/higher employment per unit capacity • Decentralized • Environment and Climate change • Increases octane number • Safer/cheaper Oxygenate as it replaces MTBE

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