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India’s ethanol conundrum
Context:
The future of India’s renewables strategy hangs on a delicate food-fuel trade-off; and a choice between intensifying hunger and reducing fossil fuel use.
India's Ethanol Blending Target Challenges
- Ethanol Blending Progress: EBP increased from 1.6% to 11.8%. COP28 pledges global renewable energy, adding pressure for India's 20% target.
- 2025 Target Hurdles: Challenges in reaching 20% ethanol blending by 2025; low sugar stocks, impending sugarcane shortfall complicate goals.
- Transition to Grains-Based Ethanol: Shift to grains-based ethanol indicated. NAFED and NCCF procure maize, risking economic challenges and impacting food prices.
Crude Oil and Food Price Dynamics
- Feedstock Impact on Prices: Sugarcane and corn ethanol production influences global food, crude prices. Sugarcane has minimal trade-off; corn diverts grain.
- Food-Fuel Conflict: Corn-based ethanol poses food-fuel conflict, historically linked to high crude prices, affecting global food markets (2006-14).
- Crude and Food Price Linkage: Crude prices correlate with elevated food prices. Post-pandemic oil recovery contributes to 2021 food price rise, emphasizing careful transition.
Balancing Renewable Energy Goals and Food Security
- Differential Pricing Impact: Differential pricing incentivizes cane juice for ethanol. 2017-18 led to abandoning the sustainable molasses route. December 2023 corrective step bans cane juice use.
- Grains-Based Ethanol Transition: Transition raises food inflation concerns. India needs 16.5M tonnes annually for 2025 EBP. Delicate food-fuel trade-off demands strategic choices.
- Strategic Choices: Government can reconsider EBP target or stagger to manage contradictions. Urgent investment in renewables, infrastructure, and urban design is crucial. Balancing hunger and reducing fossil fuel use requires careful consideration.
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