The discussion around energy security has been at the forefront globally, and for a country like India which aims to shift towards sustainable and green sources especially in the mobility segment the topic of ethanol blending has never been so relevant.
For the over Rs 5,000 crore turnover conglomerate Triveni Engineering and Industries, the government’s push towards ethanol economy has been a boon in the making. In fact, the company which started supplying ethanol as a by-product to OMCs when the blending was voluntary is now doubling its manufacturing capacity.
“Ethanol blending plays a very, very important role. I think there are enormous benefits that will accrue to the country by 20% blending by 25-26% where we’re estimating a saving of one lakh crore in terms of foreign exchange annually,” says Tarun Sawhney (pictured above), Vice-Chairman and MD, Triveni Engineering and Industries.
History of ethanol blending in India
The process of ethanol blending in petrol is not new to India. In fact, it was in January 2003, the Ethanol Blended Petrol was launched in the country. In 2006, the Ministry of Petroleum and Natural Gas directed the Public Sector Oil Marketing Companies (OMCs) to sell 5% EBP in 20 states and 4 UTs. Even though the programme started early it faced multiple inherent challenges leading to slow adoption and growth. But the programme did not meet success.
There were various factors such as non-inclusion of conversion of grain to ethanol, high taxation of ethanol, procurement challenges, pricing challenges, limited availability of raw materials and constraint on the part of state governments among others.
It was in December 2014, the government of India revisited the programmed and made necessary changes like mandating blending instead of leaving it up to OMCs to voluntary look at it.
On the other hand, ethanol blending is not only helping reduce emission level, but also helps the government save on fuel imports, which means more energy security and reduction on import bills. And help improve farmer income.
While it is difficult to estimate the size of the Ethanol blending industry, Sawhney says it could easily be upwards of Rs 50,000 crore once the E20 fuel is available at scale.
For the unversed, the government of India has set an ambitious target of introduction of E20 fuel (petrol) which is basically 20 percent blend of ethanol in petrol from April 2023. The government is looking at the success of Brazil, where the flex-fuel vehicles are designed to even run on 85 percent or E85 blended fuel.
The growth drivers
Triveni Engineering entered the distillery business in 2006 and was supplying limited quantities of ethanol to OMCs. But in 2014, when the government pushed the case of ethanol fuel, the company saw huge opportunity and demand.
“Just to give a genesis, we had a single distillery back in 2006-2007, we expanded that 2.5 years ago. In April 2022, we again commissioned a 200 KLPD plant that is a dual feed plant to process grain as well as process molasses and juice and the 60KLPD Grain distillery.
In addition, we have also expanded the existing two distilleries. Today we stand at a collective capacity of 660 crore KLPD where 40% of our capacity has the ability of processing grain,” says Sawhney.
Going forward, the company has already announced a CAPEX of Rs 460 crore for expanding its production capacity from 660 KLPD to 1,110 KLPD.
It is important to note that with the growth in its distillery business is currently contributing around 20 percent (around Rs 1,000 crore) to the Group revenue.
Impact of electrification
While most auto ancillary companies are looking to derisk themselves from IC-vehicle segment, the Triveni Group sees no reason to be worried about electrification at present.
“I think as far as electrification and India is concerned, we’re a long way away, the number of electric cars on the road are abysmally low and frankly speaking, for a country like India the cost of electric cars I think we’re going to have to go up that experience curve where prices have to come down quite substantially,” says Sawhney.
He believes that EVs would be more of an “urban mobility solution for the next 10-15 years because you need to have charging the distances that a vehicle can go are short”.
On the other hand, he says for a large country like India, ethanol is the solution for the next couple of decades, maybe longer without a shadow of doubt.
“It is not the first time I’ve been asked this question, after considering the thought, I believe that both solutions can co-exist harmoniously for the next multiple decades.”