The government is considering increasing the ethanol price for the 2024-25 season as well as the minimum selling price of sugar, Food Minister Pralhad Joshi said.

Joshi said the proposal on hiking the ethanol price is under consideration of the government. The petroleum ministry is looking into the matter.

Background: 

• Ethanol, derived from cane juice, plays a vital role in India’s biofuel strategy as part of its efforts towards cleaner energy. However, the price of ethanol produced from cane juice has remained unchanged at Rs 65.61 per litre since the 2022-23 period.

• In comparison, the minimum selling price of sugar has been set at Rs 31 per kilogram since February 2019, which has also not seen any increase. 

• Currently, ethanol produced from cane juice is priced at Rs 65.61/litre, while rates for ethanol from B-Heavy and C-Heavy molasses stand at Rs 60.73/litre and Rs 56.28/litre, respectively.

What are the implications of this move?

1) Boost to the Sugar Industry:

A hike in the minimum selling price of sugar (currently Rs 31/kg) would help improve the profitability of sugar mills, which have been struggling with stagnant prices since 2019 despite rising production costs. By boosting the financial health of sugar mills, the government could ensure timely payments to farmers for sugarcane, helping to reduce cane arrears. 

2) Enhancement of Ethanol Blending Program:

A price hike for ethanol would incentivize sugar mills to divert more cane juice and molasses towards ethanol production. This is key for achieving India’s target of 20% ethanol blending in petrol by 2025. By ramping up ethanol production, India can reduce its dependence on fossil fuels, cut down on carbon emissions, and move closer to its clean energy goals. 

3) Impact on Consumers:

An increase in the minimum selling price of sugar could lead to higher retail sugar prices, affecting consumer spending, particularly on essential food items. A rise in ethanol prices could influence the price of blended petrol. However, the long-term benefits in reducing crude oil imports may offset short-term fuel price fluctuations. 

4) Support for Farmers:

Sugarcane farmers could benefit from better payment timelines as mills improve their liquidity due to the ethanol and sugar price hikes, ensuring economic stability for the farming community. 

5) Strategic Advantages:

Increasing ethanol production aligns with India’s goal of reducing crude oil imports and enhancing energy security. Ethanol blending reduces carbon emissions, supporting India’s commitments under international climate agreements.

What is ethanol blending?

• Ethanol is one of the principal biofuels, which is naturally produced by the fermentation of sugar by yeast or via petrochemical processes such as ethylene hydration.

• It has medical applications as an anti-septic and disinfectant. 

• It is used as a chemical solvent and in the synthesis of organic compounds, apart from being an alternative fuel source. 

• It is an agro-based product, mainly produced from a by-product of the sugar industry, namely molasses.

• Ethanol blending offers significant advantages such as increase in Research Octane Number (RON) of the blend, fuel embedded oxygen and higher flame speed. These properties of ethanol help in complete combustion and reduce vehicular emissions such as hydrocarbon, carbon monoxide and particulate matter.

• The government launched Ethanol Blended Petrol (EBP) Programme in 2003 for undertaking blending of ethanol in petrol to address environmental concerns due to fossil fuel burning, provide remuneration to farmers, subsidize crude imports and achieve forex savings.

• Blending locally produced ethanol with petrol will help India strengthen its energy security, enable local enterprises and farmers to participate in the energy economy and reduce vehicular emissions. 

• The government has promoted usage of biofuel in the country by notification of the National Policy on Biofuels (NPB), 2018 which allows use of multiple feedstocks for producing bio-ethanol for increased supply of ethanol for blending with petrol. 

• With the vision to boost agricultural economy, reduce dependence on imported fossil fuel, save foreign exchange on account of crude oil import bill and reduce air pollution, the government has fixed a target of 10 per cent blending of fuel grade ethanol with petrol by 2022, and 20 per cent by 2025.

(The author is a trainer for Civil Services aspirants.)