This is an audio transcript of The Morning Brief podcast episode: Will Ethanol Sweeten India’s Oil Import Bill?

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This is the morning brief from the economic times

Kiran Somwanshi

I have to buy a new car, but I'm confused. Should I buy an electric vehicle or a petrol car? EVS may have a charging infrastructure issue, but petrol prices are hurting quite a lot. Plus there is this guilt of polluting the environment.

Kalpana Pathak 

How about I tell you that with the recent announcement by the government of India, you can somewhat lay that girls to rest

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Ajj humne petrol main 20 pratichat ethanol blending ke laskh ko 2025 pura krne ka sankalp liya

Kiran Somwanshi  

This does sound to be a cool move. But will this be enough?

Kalpana Pathak  

Well, India is already mixing 10% ethanol with petrol and aims to increase it to 20% also known as e 20. Not only will ethanol blending reduce emissions by 41%, but also help bring down India's oil import bill by an estimated figure of over 30,000 Crore or $4 billion. The move to increase ethanol blending to 20% has some clear advantages, but not without its share of challenges and concerns.

Kiran Somwanshi   

All this and much more is what we are going to find out in today's episode. It's Thursday 16th of June. From the economic times. I'm Kiran Somwanshi

Kalpana Pathak   

And I'm Kalpana Pathak and you are listening to will ethanol sweetened India's oil import bill on the morning brief. Do tune into et play our latest platform for all audio content, including the morning brief. In this episode, we analyze the e 20. roadmap with our guests from industry and policy think tanks,

Kiran Somwanshi   

but honestly Kalpana, before we deep dive into the e 20. Development and its implications, I would like to get my fuel chemistry right. The what the why and the where of ethanol.

Kalpana Pathak  

So Kiran, ethanol, or ethyl alcohol is a fuel made from various plant materials like fermented sugarcane juice, or food grains like maize, corn or rice. Ethanol is high in oxygen content, which also allows engines to burn fuel completely and lower emissions. A fun fact Kieran is that ethanol was first prepared synthetically in 1825, by Michael Faraday, the father of electric motor, and it was forced to use as an automotive fuel in 1908.

Kiran Somwanshi  

Well, this definitely gets us started. But why is blending ethanol with petrol so important for India? That's the question we posed to our guest Milind Patke from GPS renewables.

Milind S Patke  

India imports almost 85% of its gross requirement. petrol and diesel are the main tools when you compare with the developed world the per capita consumption of India in terms of petrol and diesel is pretty low. And therefore, you will see that almost nine to 10% of petrol growth after the pandemic zone will be recorded, which is very huge. So, next five to 10 years, if you look at it, despite electric vehicles coming in, there will be a huge growth of petrol in India. And if that happens, then obviously your imports are going to go up, which means it's not a good news. The second part is of course, the climate, part climate part, you all are aware of our commitments in the cop 25 and subsequent commitments that Prime Minister has made. When you replace 10% or 20% of petrol with ethanol, you're definitely doing two things. One is you're reducing your import bit to that extent. And second, of course, is that you're reducing the carbon dioxide in the atmosphere. So that is why ethanol blending is very important for a developing country like India.

Kalpana Pathak  

Karthik, the nation from the Council of Energy Environment and Water expressed similar insights.

Karthik Ganesan   

One is if you look at the composition of who is consuming petrol and economy, it is slowly but surely moving in the direction of the four wheelers, right in 2012. That number was about 36% of the overall petrol was four wheelers. Today it's about 40% Because two wheelers obviously was aspirational growth of people moving out of two wheelers, four wheelers that really speaks to this point about you know, how growing aspirations are going to drive petrol commercial going forward in Maschine heavier duty vehicles right. four wheelers as opposed to two wheelers and This means that we are setting ourselves up for increased import dependency, alongside no other measures to curtail fossil fuel dependence, whether it is electric vehicles, which is predominantly the pathway that we're looking at post 2030. In the interim, to secure ourselves from the vagaries of the global market. We've all seen the price go up from 70 rupees to about 100 in the span of just literally six, seven months. And it's important that we have economic lentic Jain important role and ethanol at the end of the day, if you look at the notified price today, of course, that will also continuously keep going up going up with the with the cost of inputs is about, you know, 25 30% cheaper than petrol on a liter liter basis.

Kiran Somwanshi  

So is there a conclusive proof that ethanol blending helps reduce emissions? 

Kalpana Pathak    

Well,the emissions do come down by 41%. And this is what million shares.

Milind S Patke   

We talk about the emissions, we talk about net emissions on a lifecycle basis. That means from the time you've grown the sugarcane, then you've brought it to the factory, then you take out the sugar, then you have taken out the molasses and distilled it made ethanol transported ethanol to the oil company and then it is blended with petrol the entire lifecycle, if you look at it, it is the carbon emissions are reduced to the extent of 41% There is definitely a proof of that. Now, you would say that nobody to know moves in tank glories which burn diesel Yeah, that is true. And that is the reason today, oil companies are experimenting with transporting blended ethanol petrol through pipelines. We already have a huge pipeline network in the country. And we are learning from the Brazil experience and the Brazil experience says that more the ethanol percentage actually less is the corrosive effect on the pipelines as we increase our blending percentage, there is a case for moving the ethanol blended petrol more and more through pipelines or through electricity runoff trains, our the wagons, Green Dragons, so which means even that 41% emission reduction can go up when you further reduce the transportation to a positive fuel.

Kiran Somwanshi  

But the moot question is, whether ethanol is as efficient as petrol. Milind shared his insights

Milind S Patke 

Our currently engines are not meant for normal petrol, because all the vehicles which are manufactured in the country in India after 2008 are material compatible, which means they can take it wrong, there won't be any corrosion etc. But engine wise they are not compatible even for 10 personal and that is why we are seeing the efficiency getting sacrificed the mileage is getting sacrificed. That is why if your car was giving a mileage of 10 or 11, with the need petrol with ethanol, it may give slightly less, but then you can't blame automakers for it because we as a as a nation, were not fully aware that we will be able to make so much of ethanol available across the country, the oil marketing companies also till about a year back would not have imagined that they can reach 10% and therefore, to counter that only the automakers are now coming up with Indian designs which will give you the same mileage but we'll have to wait.

Kalpana Pathak  

So Kiran you still have to wait for a couple of more years to get an efficient hybrid, or Flexi fuel car or an affordable EV.

Kiran Somwanshi  

Yeah, but it's lower efficiency the only challenge to contend with or do we have more bumps on the road.

Milind S Patke  

There's a much bigger challenge in India you have only up Maharashtra Karnataka producing sugar basic around whereas you require a cannon uniformly across the country, because petrol is consumed across the country in the nook and corner of the country. So everywhere wherever petrol is sold Exxon has to be available today you have to move product from all points. So automakers were not having this confidence in last two to three years. They may have now this year they have the confidence that yes, we can launch our vehicle which is engine compatible for Eaton an e 20. And so obviously the r&d takes time and therefore they given the time limit of 2024. The second thing is they're also planning to launch flex fuel vehicles maybe three years, four years, five years down the line. When we go for e 27. You will find some states are earning enough return on some states not have enough it's not. So what does the vehicle owner like you and me do? So probably then you will have oil marketing companies dispensing eat and for older vehicle e 20. For new vehicles, and the flex fuel vehicles can take anything from zero to 100.

Kiran Somwanshi   

Well, Karthik does not seem very optimal. Stick about this,

Karthik Ganesan    

There is a big stock of existing vehicles. Let's remember that right especially if two wheelers there are almost 18 crore two wheelers in this country, the existing stock of two wheelers, which account for 60% of the petrol in the national economy are nowhere close to compatibility. So, ie 10 and above are going to have a detrimental impact. And I think it's a bit premature in India to sort of look at flexfuel. And in any case, the two wheeler market given that it consumes 60% of the fuel and given that the total cost of operation of electric based options is much more producer, we should possibly look at, you know, that switch to electric based instead of perhaps going you know, the very aggressive route of you know, replacing more petrol to it now.

Kiran Somwanshi  

That's quite a lot of challenges Kalpana

Kalpana Pathak  

Definitely a lot to contend with Kiran. In fact, in March, the Institute for Energy economics and financial analysis published a report which showcased that how accelerating uptake of EVs is a better idea. I spoke with Charles Warangal, an independent energy researcher from Australia, who authored that report about how the same goals are reached by using a fraction of the land.

Charles Worringham  

The oil, oil import bill, which India has each year is very big. And the ethanol blending policy has as one of its aims to try to address that by the substitution of the 20% ethanol blending target. So that's one of the principal goals. But if one looks back at the the original justification for the policy, then in addition to the setting of foreign exchange, there are questions of energy security, lower carbon emissions, better air quality, greater self reliance, employment generation, and so on. So there's a range of different goals. And these are very important goals. The question, however, is whether the ethanol blending policy is necessarily the best way to achieve those. The reason why I have some concerns about this policy is that there may actually be better alternatives. So for example, the fact that India has the capacity now to manufacture batteries to manufacture solar panels at scale, and therefore to bring domestically a lot of production that may otherwise have been overseas. There's the potential for India to cut its import bill by the pairing of additional electric vehicles as an alternative potentially, to the benefits brought about by ethanol. The major comparison which I undertook in the report was to look at the distance which can be achieved by growing ethanol in the quantities which are envisaged in the ethanol roadmap. And those are set out year by year up to the year 2025. And there's been a target that's been brought forward to achieve e 20 in a much shorter timeframe than had originally been envisaged. And the comparison would be with the use of land instead of growing additional crops to produce the ethanol or diverting existing cropland from food and fodder production to ethanol production as a fuel. One way to look at the use of land for solar to recharge the batteries of an equivalent set of electric vehicles, one can then get some idea of the quantities of land required to achieve each the basic finding of my analysis was that it's actually very, very much more land efficient for India to look at increasing the quantity of solar recharged electric vehicles, as opposed to the petrol petrol, the ethanol blending policy with respect to the amount of distance that actually will be achieved per unit of land. We're talking here about hundreds of times more efficient in terms of land use for evey recharging growing crops for ethanol.

Kiran Somwanshi 

So why India invest in the long term goal of evey vehicles is ethanol blending a stopgap arrangement to cut down or import bill.

Charles Worringham   

The ethanol blending policy has merit as a short term measure. Again, a limit on that is that the investment in the additional distillation infrastructure investment and the logistics involved in the conversion of the vehicle fleet to accommodate e 20. Basically, is a fairly long term proposition. So if it's only a really as a stopgap measure, one has to question whether it's truly worthwhile because the more one invests in ethanol blending, in a sense, the more one is encouraging the perpetuation and the prolongation of the life of the internal combustion engine. So in a way, it delays the inevitable transition. To some extent, the enhanced ethanol blending target works against the uptake of electric vehicles.

Kiran Somwanshi  

That's interesting. To ethanol blending seems to be at loggerheads with the country's EV goal.Kalpana, I'm curious if it or not blending is such a challenging issue, then how did Brazil achieve success in this area and have Flexi fuel cars? Didn't the food versus fuel debate bother them?

Kalpana Pathak  

That's a good question, Karen. In fact, Brazil has one of the most successful ethanol programs in the world, because one, it has less population and more land compared to India. And two, there is ample rainfall for sugar cultivation. In India, sugar cane is not just a rainfall dependent crop, but needs water from other sources too. So it may not be possible to replicate the Brazilian model here. But we can still move the blending up from 10% to 20%. Brazil has almost 46% of its petrol replaced by ethanol. If that happens in India, its fuel import bill can come down drastically and give us cleaner air.

Kiran Somwanshi

But what about the food versus fuel debate here in India, we do not want food security and energy security to become competing goals. How is it advisable to use food based biofuel for cutting down on oil imports,

Kalpana Pathak 

That does remain a concern, as Charles says that the problem is not ethanol from sugar. But from food grains,

Charles Worringham  

we have to factor in issues of food security, recalling that India still has a somewhat precarious food supply situation, and has slipped down in the world hunger index and regrettably in the last report, and one of the factors that the authors of the roadmap put forward is that there's the capacity to absorb surplus production to make ethanol. And that's reasonably clear for sugar. But it is much less clear in the case of grains and the roadmap suggest that as much as 30,000 least in the most sort of pessimistic scenario in which stocks are inadequate surpluses are not adequate, and one looks at maize as the major grain that is being suggested. To produce ethanol. In fact, most of the additional ethanol would come from grain rather than from sugar, as much as 30,000 square kilometers could be required, which is fully 1/3 of the entire area, Sun under maize currently in the country, so this is a significant diversion of land towards fuel production as opposed to food and fodder production.

Kiran Somwanshi  

Milind explains in detail, how the government is trying to manage the surplus sugar by converting into ethanol production, but he has a contrasting opinion from Charles when it comes to the food versus fuel debate.

Milind S Patke    

See India produces surplus sugar year on year basis. Now, what does India do with the surplus sugar India exports. Now, this export has been going on for quite some time and the Indian government is giving a subsidy so that the exporters are able to match the price in the international market and export successfully, because ultimately, you need to deal with the surplus. Now, what has happened suddenly is that as per the commitment in WTO, from 2024 calendar year this entire sugar subsidy would be withdrawn when the sugar subsidy is withdrawn, what does India do with this surplus sugar. So the best way to do it is government thought in its wisdom that divert the feedstock to manufacturing ethanol. And now, so then then there was a problem that if you want to manufacture ethanol, you will almost get equivalent of 360 Crore litres of ethanol instead of getting 60 lakh tons of sugar. So that was fitting well with the plans, but then we didn't have so much of distillation capacity in the country. So, India then asked people to set up more and more decision capacities in the country and that is how it has been planned that the overall capacity would go up towards 670 COVID Mainly from sugarcane. If we have e 20, we require 1000 Crore litres of barons would come from grain and rice, rice already there is a three year to four year surplus stock in the country. Therefore, surplus rice can be used for manufacturing tomorrow. Similarly, sugar cane is a water intensive crop rice is also water intensive crop. Maize is the least water intensive. And therefore Nithya Yoga has successfully taken up this message across to farmers saying that you need to now switch to sugarcane to rice and rice to maize. Therefore, I don't think there is any food versus fuel debate at this point in time. Next three to four years of sufficient economic capacities will come in the country. And there won't be any photo related issue because already we are dealing with surpluses. After that yes, we made lead remains to be seen if we have a bad monsoon, especially our US flood or drought related issue. is in Morocco strange, especially up Maharashtra, then there could be a worry, at least in the short term, but not in the long term.

Kiran Somwanshi   

Karthik also echoed the concerns over climate change disrupting the supply of ethanol.

Karthik Ganesan    

I would be cautious in looking at the seasonality and the vagaries of climate. And the way it could impact the unlike for instance, production from petroleum, which is an important commodity it is not necessarily influenced by climatic factors. So drought is not going to impact a supply whereas one year's drought could basically mean you don't have a Toronto blank, right?

Kalpana Pathak   

Well, no doubt reaching 20% blending targets in the next three to four years is an ambitious one. On one hand, it has the potential to save India $4 billion in its fuel import bill and make its air cleaner. But on the other hand, there is no denying that it could threaten India's food and water security, especially in the light of climate change. The question is, Can alternatives to this ambitious 820 plan we looked at when the country is racing ahead full throttle to be a leader in alternative energy sources, especially solar. It is imperative that efforts on that front are expedited. A greater share of renewable sources of power will help India not only reduce its oil import bill and lower emissions, but also keep the food versus fuel debate and pay.

Kiran Somwanshi   

Well as a consumer. This e 20. roadmap doesn't excite me much. I've decided to go for an electric car. Probably a year later by when the charging infrastructure may be widely available.

Kalpana Pathak  

You have been listening to will ethanol sweeten India's oil import bill with me, Kalpana Phatak 

Kiran Somwanshi  

and me Kiran Somwanshi 

Kalpana Pathak   

On the morning brief. Thank you, Milind, Karthik and Charles for joining us with your insights. 

This episode was produced by Surbhi Modi from the Economic Times and Soundarya Jaychandran from Awaaz. Sound Editors: Rajas Naik from the Economic Times and Varun Kapahi from Awaaz. Executive Producer: Arijit Burman. We hope you liked this episode. Do share it on your social media networks. The morning brief drops every Tuesday, Thursday and Friday. Have a great week ahead. All the clips used in this episode belong to the respective owners credits mentioned in the description.

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