State-run oil marketing companies Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation have been given the mandate to set up around 12 ethanol manufacturing plants as part of a road map to meet the 20% ethanol blending target by 2025.
Tarun Kapoor, secretary, ministry of petroleum and natural gas, told FE that the three oil majors have been asked to set up around 150 crore litre per annum ethanol manufacturing capacity out of 1,000 crore litre that will be required to meet the target by 2025. “This will entail an investment of Rs 5,000 crore to Rs 7,000 crore,” Kapoor said.
The companies will also be simultaneously setting up storage facilities for ethanol procured from other manufacturers, as the final blending is done by refiners and the oil marketing companies, he said. The investment will likely be funded by the companies themselves, said a senior PSU official.
India has already achieved a blending percentage of 5% in FY2021. This year, it is estimated that India will cross 8% blending average. “We hope to procure about 330-340 crore litres this year against 173 crore litres last year,” Kapoor had said in a webinar recently.
At present, petrol is being sold with 10% ethanol which is E10 while the target is to reach E20 by 2025. “Next year, all the petrol sold in the country would E10 and then gradually we will move on to higher blends,” Kapoor said. As per the road map for ethanol blending in India 2020-25, by Niti Aayog and the ministry of petroleum and natural gas, there are certain challenges that need to be overcome before the target could be achieved. A prominent challenge includes ensuring availability of ethanol across states for blending; about 50% of total pump nozzles in India are supplying only E0, which means zero blending capacity.
Restrictions on inter-state movement of ethanol due to non-implementation of the amended provisions of Industries (Development & Regulation) Act, 1951, by all the states, is the other big challenge. So far, only 14 states have implemented the amended provisions.
Some of the major states consuming petrol where implementation is pending include Delhi, Uttar Pradesh, Rajasthan, West Bengal, Telangana, Odisha and Kerala.
The government has also iterated the need for change in marketing infrastructure by setting up additional storage tanks for ethanol at marketing terminals and depots, need for ethanol compliant dispensing units. Besides, having additional underground tank, pipes, hoses and dispensing units for ethanol at the retail outlets.
The oil secretary said, “given the attractive price we have given for ethanol from rice, maize and other grain wastes the response from private sector has been extremely good”. The other stakeholders like banks have also shown interest in funding the projects. “If the banks have not gone head over heels to fund the projects they have been positive in funding the projects,” Kapoor said.
Banks have been wary of funding the sugar mills in the past due to their weak balance sheets, however, now with the addition of rice, maize and other grains, the availability of ethanol would become lot easier, making funding of ethanol capacity building a lot more attractive option, said a senior PSU official.