India Redrafts Vehicle Rules to Spur Ethanol Blending

India aims to achieve higher blending ratios of fuel ethanol in the gasoline pool with changes to vehicle manufacturer obligations. But the government’s aim of achieving a 10pc blending ratio with gasoline (E10) nationwide by 2022 faces significant hurdles, let alone its ambitious E20 by 2030 target.

India’s transport ministry invited public comment on changes to vehicle rules to adopt higher fuel ethanol blends in gasoline, in a draft amendment dated 11 December. The changes require manufacturers to determine and visibly display compatibility to E20, E85 or E100 gasoline blends on new vehicles.

The move further displays the federal government’s commitment to enhancing the country’s fuel ethanol uptake. It had already announced this year up to $2.5bn in soft loans backed by banks and expanded interest subsidies for new distilleries, raised ex-mill prices for sugarcane ethanol and broadened permitted feedstocks.

Surplus rice and maize in April and September were added to the list of permitted feedstocks for ethanol supplied for blending, in addition to the sugarcane-based feedstocks of B heavy molasses, C heavy molasses and sugar cane juice, as well as damaged food grains previously accepted. But domestic food security concerns will likely temper volumes of staple foodstuffs used in ethanol production, limiting the potential for expanding ethanol production beyond sugarcane-producing states.

Committed volumes for supply in the December 2020-November 2021 marketing year remain well short of E10 with significant funding challenges blocking the way. Oil refining and marketing companies as of 15 November had accepted offers for around 2mn t of fuel ethanol for supply in 2020-21 against tenders issued for 3.6mn t, according to the Indian Sugar Mills Association. Blending the entire tendered volume could result in a 7-8pc blending rate depending on the size of the gasoline pool.

Funding access remains the main barrier, according to sugar and ethanol manufacturers. Around 40-50pc of 362 sugar mills with in-principle approval are still unable to secure loans for proposed distillery projects because of weak balance sheets, even with the tripartite mechanism agreed between banks, government and oil companies in August. But sugar mills’ poor financial performance stems from the country’s multi-year sugar glut with its sugar unable to compete in the global market, key issues the ethanol programme aims to address.

Mills’ finances look set to weaken further this marketing year with sluggish domestic demand and no announced change in the government administered sugar ex-mill price, despite raising the sugarcane price mills must pay farmers by 10 rupees/quintal to Rs285/quintal ($39/t).

Many market participants expect momentum to build behind vehicle electrification as a more viable strategy for decarbonising road transport in the medium term than pushing higher ethanol blends, although a more co-ordinated national policy approach and expansion in charging infrastructure is needed. The government in December closed expression of interest submissions for building and operating a minimum of 1,544 electric vehicle (EV) charging points along 15,145km of expressways and highways nationwide. It had already sanctioned 2,877 EV charging stations to be built within cities in 2019.

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