Sugar-Based Ethanol’s Shrinking Role in India’s Biofuel Strategy

Background:

• Sugar-based ethanol was pivotal during the launch of India’s Ethanol Blended Petrol (EBP) programme in 2003.
• Over time, raw material constraints, competing sugar demands, and strategic policy shifts have limited its growth.
• India’s 20% blending target (achieved in 2024-25) now relies on a 70% grain-based and 30% sugar-based ethanol mix.

Current Limitations:

• Water-intensive nature: Producing 1 litre of ethanol from sugarcane requires 2,860 litres of water.
• Capacity constraints: Only 875 crore litres of India’s 1,380 crore litre ethanol capacity (late 2023) came from sugarcane.
• Sugar prioritisation: Last year’s monsoon failures caused sugar shortages, pushing ethanol production down the priority list.
• Stagnant prices: No increase in procurement prices for sugar-based ethanol (from cane juice or B-heavy molasses) capped production incentives.

Impact on Sugar Millers:

• Heavy investments were made in ethanol distilleries anticipating rising demand.
• Underutilised capacity and financial strain now affect many sugar mills.
• Grain-based ethanol expansion and lack of price stability disrupted initial economic projections for sugar-based ethanol.

Grain-Based and Beyond:

• Government now favours grain-based ethanol, using surplus maize and FCI rice.
• Grain-based capacity already at 505 crore litres and growing.
• Future ethanol demand for diesel blending and industrial use highlights the unsustainability of sugar-based reliance.
• Second-generation (2G) biofuels from crop residues are emerging as the next solution, although technology is still maturing.

Multi-Feedstock Production:

• Strategic recommendation: Sugar mills should shift to multi-feedstock ethanol production (grains + residues + sugarcane).
• Government has launched an interest subvention scheme for cooperative mills; extension to private mills (60% of sector) is critical.
• Retrofitting support and assured pricing for multi-feedstock ethanol are vital to maximise national capacity.

Future Outlook for Sugar-Based Ethanol:

• Likely to stabilise at 30–40% share of the EBP blend, dependent on stable sugarcane production.
• Influencing factors:
  • Government sugar security policies
  • Competing ethanol demands
  • Environmental sustainability concerns
  • Millers’ financial viability without guaranteed price hikes