At the same time, India's economy has developed at a rapid pace and its demand for expensive crude oil has intensified. To attain sustainable growth, India is desperately looking for cheaper alternative sources of energy—especially green energy. The country holds a great potential for ethanol and the possibility for cross-boundary ventures.
India presently imports about 70 percent of its annual crude petroleum requirement of approximately 110 million tons. As prices have ranged from US$50 to $70 per barrel, the country's expenditure on foreign crude is about India Rupees (INR) 1.6 billion (US$41 million) per year.
In the next few decades, alternative fuels will compete for markets currently dominated by gasoline. Ethanol—an important renewable transportation fuel—is likely to be one of the foremost choices. The Indian government recognizes this and on the week of Oct. 22 ordered the mandatory blending of 5 percent ethanol with all gasoline sold in the country. This is the seed from which India's ethanol industry looks set to grow.
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India already has a small ethanol industry. Its installed capacity of 300 MMly (79 MMgy) is producing at less than 50 percent capacity, but meeting the demand of the potable and chemical industry trials under government-sponsored projects.
The petroleum industry is committed to utilizing ethanol as a transportation fuel. Farmers are expected to benefit as well. India has a sizable portion of fertile, uncultivated land suitable for producing sugarcane, which is an excellent feedstock for ethanol production. India also has a pool of highly educated, low-cost labor.
The seeds for biofuel ventures were sown more than seven years ago when the India Ethanol Coalition was formed by Winrock International India with the full support by Shri Santosh Kumar Gangwar, minister of state for petroleum and natural gas. Since then, India's government has been exploring ways to boost the agriculture sector and reduce environmental pollution with ethanol-blended petroleum.
The coalition conducted research and development studies and launched three pilot projects in 2001—two in Maharashtra and one in Uttar Pradesh. The pilot projects continue to supply the market, blending 5 percent ethanol with petroleum, but only to the retail outlets in their supply areas.
Discussions were also held with concerned agencies, including the governments and industries of major sugar-producing states. As a result, they confirmed the available capacity to produce ethanol.
The Indian government has since set up an expert group headed by the executive director of the Centre for High Technology to examine various options for blending ethanol with petroleum, including the use of ethyl tertiary butyl ether in refineries. Considering the logistical and financial advantages, the group has recommended blending of ethanol with petroleum at supply locations (terminals/depots) of oil companies.
Since 2003, ethanol-blended petroleum has been available in nine states and four territories: Andhra Pradesh, Daman, Diu, Goa, Dadra, Nagar Haveli, Gujarat, Chandigarh, Haryana, Pondicherry, Karnataka, Maharashtra, Punjab, Tamilnadu and Uttar Pradesh.
In mid-October, United Progressive Alliance, the current ruling coalition of political parties in India's government, issued a 5 percent mandate for blending ethanol with petroleum with immediate effect. They are also willing to double it to 10 percent beginning October 2008. The decision directly benefits sugarcane-producing states like Uttar Pradesh, Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh, Gujarat and Bihar—all of which face excess sugarcane cultivation this crop year.
The policy is now clear, but a question of “comfort zone” for oil companies remains. Indian ethanol producers should concentrate on the technologies which bring down the cost of production. It is here that Brazil's input is important.
Earlier this year, Brazilian President Luiz Inácio Lula da Silva met with Prime Minister Manmohan Singh in New Delhi to discuss potential partnerships in biofuel production. Indian companies like Praj Industries, Alfa Laval and others would benefit from such cooperation, particularly as Praj has already built a name for itself in the Latin American market.
Indian Sugar Mills and the private stand-alone ethanol manufacturers should cut the cost of production by using good technologies which require fewer resources, such as steam, water and electricity. They should also concentrate on cogeneration through effluent generated by sugarcane juice and molasses. Petroleum suppliers should appreciate and support such activities.
Lower production costs would bring ethanol prices down from the current INR21.50 per liter (US$2.07 per gallon). Suppliers from Maharashtra are supplying ethanol at INR19.50 per liter (US$1.88 per gallon). This would also allow ethanol suppliers to focus on expanding capacity, creating a “win-win” for the industry.
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