The Union Cabinet on Wednesday unveiled a comprehensive biofuels policy which, among other things,

allows farmers to divert excess crop produce for biofuels production and sets aside ₹5,000 crore to help
establish second-generation (2G) ethanol refineries.

The National Biofuels Policy 2018 seeks to expand the range of feedstock available for ethanol
production beyond sugar molasses, an official statement said.

Sugarcane juice, sugar-containing crops like beet, sorghum, corn and cassava, and damaged grains unfit
for human consumption, such as rotten potato, wheat and broken rice, can be considered for ethanol
production.

Besides, farmers who are “at risk of not getting the appropriate price for their produce during the
surplus production phase” can use the surplus grains to generate ethanol which cannot be blended with
petrol, provided they have the approval of the National Biofuels Coordination Committee, the statement
said.

The policy will offer a mechanism to address the mounting municipal solid waste problem in the country
by converting it into drop-in fuels.

The new policy also proposes a viability gap funding scheme of ₹5,000 crore for 2G biorefineries, to be
deployed over six years.

The scheme will be in addition to other incentives and higher purchase prices available to 2G biofuels as
compared to 1G biofuels (bioethanol and biodiesel).

Oil marketing companies are in the process of setting up 12 2G bio refineries at an investment of around
₹10,000 crore.

To source non-edible oilseeds, used cooking oil and short-generation crops to produce biodiesel, the
policy suggests the setting up of supply chain mechanisms.

To synergise efforts to improve biofuels production, the policy delineates the roles and responsibilities
of various ministries and departments.

Forex savings

According to the statement, the total ethanol production for fuel blending in 2017-18 is expected to be
150 crore litres, leading to forex savings of ₹4,000 crore.

There will be considerable environmental and health benefits, as the use of 1 crore litre in fuel blending
reduces CO2 emission by 20,000 tonnes.

Besides, the use of crop residues such as rice and wheat straw for biofuels production will further bring
down toxic emissions, it said.

Further, the 2G ethanol refineries will improve infrastructure in rural areas and create thousands of jobs
in plant operations and supply chain management, in addition to promoting village level
entrepreneurship, the statement added.
A report recently filed with the USDA Foreign Agricultural Service’s Global Agricultural Information
Network shows the average ethanol blend rate in India is expected to reach a record 5.8 percent this
year, up from the record of 4.1 percent set last year.

India currently aims to achieve an E10 blend by 2020 and E20 by 2030. According to the report, India’s
Ethanol Blending Program stipulates procurement of ethanol produced directly from B-heavy molasses,
sugarcane juice, and damaged food grains. A surplus sugar season coupled with financial incentives to
convert excess sugar into ethanol is expected to help the country’s oil marketing companies (OMCs)
procure more than 2.4 billion liters (634.01 million gallons) of ethanol this year.

The report indicates it is unlikely the country’s E20 goals will be reached by 2030 due to the general
inability of the cane industry to supply India’s fuel demand, the fact that imports are managed in a way
that minimizes the role they can play, and the expected timeframe for commercial-scale production of
advanced biofuels.

India is expected to consume a record 3.8 billion liters of ethanol this year, up from a record 3.1 billion
liters in 2018. The report states a 6.6 percent blend rate could be achievable if all the ethanol produced
form molasses this year is blended with gasoline. “Potential blending would be higher yet if imports
were permitted and duties lowered,” the report states. “However, given demand from the potable and
industrial sectors and limitations on imports, a national blend average of 5.8 percent in 2019 is
expected.”

Ethanol production in India is expected to reach a record 3 billion liters this year, up 11 percent from
2018. Last year, approximately 2.7 billion liters of ethanol was produced from molasses.

Regarding imports, the U.S. has remained the largest ethanol supplier to India for the past six years.
Indian ethanol importers were down 14 percent last year, falling to 633 million liters. The U.S. accounted
for 94 percent of 2018 imports.

According to the report, India had 166 ethanol refineries in place last year, up from 161 in 2018. That
number is expected to increase this year. Nameplate capacity was 2.3 billion liters in 2018 and is
expected to increase to 2.6 billion liters this year. Capacity use was 117 percent in 2018 and is expected
to fall go 115 percent in 2019.

A full copy of the report can be downloaded from the USDA FAS GAIN website.