Context

The government has set targets of 10 per cent bioethanol blending of petrol by 2022 and to raise it to 20 per cent by 2030 under the ethanol blending programme to curb carbon emissions and reduce India’s dependence on imported crude oil.

About

What are 1G and 2G biofuel plants?

• Biofuels are liquid or gaseous fuels that are produced from biodegradable fractions of products, remains from agricultural production and forestry, as well as biodegradable fractions of industrial and municipal wastes.
• However, ethanol produced from renewable energy sources is one of the most promising biofuels for the future.
• 1G bioethanol plants: 1G bioethanol plants utilise sugarcane juice and molasses, byproducts in the production of sugar, as raw material
• 2G bioethanol plants: Whereas 2G plants utilise surplus biomass and agricultural waste to produce bioethanol.
• 1G and 2G bioethanol plants are set to play a key role in making bio-ethanol available for blending but face challenges in attracting investments from the private sector.

Challenges

• Insufficient domestic production: Currently, domestic production of bioethanol is not sufficient to meet the demand for bio-ethanol for blending with petrol at Indian Oil Marketing Companies (OMCs).
  • Sugar mills, which are the key domestic suppliers of bio-ethanol to OMCs, were only able to supply 1.9 billion litres of bio-ethanol to OMCs equating to 57.6 per cent of the total demand of 3.3 billion litres.
• Costly agricultural waste: The price of obtaining agricultural waste required for the production of bio-ethanol at 2G plants was currently too high for it to be viable for private investors in the country.
• Doubtful financial stability: Many sugar mills which are best placed to produce bioethanol do not have the financial stability to invest in biofuel plants and there and there are also concerns among investors on the uncertainty o the price of bio-ethanol in the future.

What needs to be done?

• Pricing of agricultural waste: The state governments needed to set up depots where farmers could drop their agricultural waste and that the central government should fix a price for agricultural waste to make investments in 2G bioethanol production an attractive proposition.
  • The three state-run OMCs Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd. and Hindustan Petroleum Corporation Ltd. are currently in the process of setting up 2G bio-ethanol plants.
• Greater visibility on price: The government should provide greater visibility on the price of bioethanol that sugar mills can expect by announcing a mechanism by which the price of bio-ethanol would be decided.
• More focus on production: The impetus for bioethanol uptake was driven by government worldwide, and a target that a certain percentage of ethanol blending be done using ethanol generated from 2G plants would help boost investment in the area.