Economic Potential and relevance of Biofuel program in India

SUGARCANE ETHANOL – ACHIEVABLE BIOFUEL TARGET

In 2006, India was the seventh largest net importer of oil in the world. With 2007 net imports of 1.8 million bbl/d, India is currently dependent on imports for 68 percent of its oil consumption.EIA expects India to become the fourth largest net importer of oil in the world by 2025.

Alcohol requirement:

Alcohol based chemical Industries: 1,100 million Lts.

Potable Alcohol requirement: 1,000 million Lts.

@5% ethanol Blending : 600 million Lts.

@10% ethanol Blending : + 600 million Lts.

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3,300 Million Lts.

India produces 1.3 billion Lts and requires almost 2 billion Lts if it has to cater 10% blending.

Petrol Consumed in 2006-07: 9,295,000MT.Only 0.64% of petrol is replaced with Ethanol.

Alcohol at 10% level requires another 10-15 million Klts, so a possible acreage growth of 25-30Million ton based on price rewarded to farmer. We have been discussing only Road; we are yet to talk of Rail, Ocean, and Air Freight using Ethanol.

Potential for ethanol in India

The direct employment potential is likely to be at least 50 times that of a Petroleum refinery.

A 6 billion liters ethanol production could save an estimated around US$1 billion in foreign exchange in diesel / petrol equivalent. This in turn would provide an additional income per year to the tune of Rs 13000 Crores at an average price of Rs. 1300 per tone. Petrol consumption in India during 2006-07 is 9,295,000 MT and only 0.64% of petrol is replaced with Ethanol.

At 10 per cent levels India would need at least 1,200 million liters of ethanol. Purchases of sugarcane, the primary feedstock for ethanol production would be about Rs 12,600 crore at current prices.

Year	Gasoline Demand MMT	Ethanol Demand Th KL			Molasses Production MMT			Ethanol production						Utilisation of ethanol
					Molasses Th KL		Cane Th KL				Total Th KL		Potable Th KL				Industry Th KL				Balance Th KL
2001-02	7.07	416.14			8.77		1775			0			1775			648			600			527
2006-07	10.07	592.72			11.36		2300			1485			3785			765			711			2309
2011-12	12.85	756.35			11.36		2300			1485			3785			887			844			2054
2016-17	16.4	965.30			11.36		2300			1485			3785			1028			1003			1754

Sugarcane

Area Under Sugarcane : 3,329,000 hectares
Production of Sugarcane (Yield) : 65 MT/Hectare
No of Factories in Operation : 500 & above
Average capacity of factory : 3500 Tone Per Day
Molasses Production : 6,500,000 MT
Molasses Percentage : 4.4%
Percapita Consumption of Sugar : 20 Kg
Percapita Consumption of Jaggery : 5Kg

Of the Total Cane Production:

12% will go in to Seed purpose and 5% goes to Chewing and Juice manufacturing.
25-30% will go in to Khandasari and Jaggery Production.
Only 60% is being used for Sugar production.

Policy handicaps

• The sugar industry is eagerly waiting for a reduction in excise duty on molasses, which is currently high at Rs 750 a tone. The sugar industry has also sought for placing ethanol in the "special category of goods" under clause 5A of the Central Sales Tax Act, so that the state governments will not impose local taxes on this commodity.
• The government has not been giving due diligence to Ethanol Blending and Incentives like Biodiesel. Each Individual state has its own policy for blending Ethanol as they have their own Potable alcohol requirements which are major revenue earners and excepting UP most states need to accept Juice conversion to Ethanol. Excise revenues of Alcohol are 30,000 Crores. Trading and Excise regulations should be Uniform across all states decontrolling Sugar.
• Ethanol price should be on par with MTBE or Biodiesel looking at it as Oxygenate, rather than Calorific value. Also Blending should be at Pump with Proper Monitoring as this could generate possible CDM.
• Allow Ethanol manufacturing from Juice and also utilize Transgenetics for Ethanol.

Focal areas

• Sugarcane Cultivation has been dropping drastically due to Agronomical, Management failures handicapped by Labor shortage and Lack of Incentives.
• New revenue streams to better financial health of sector like Fortified sugar, Chemicals, Bioplastics be looked in to.
• Work on Carbon, Energy and water Footprint across entire value chain to reduce Pollutants and develop possible CDM templates.
• Allow free trade of ethanol and develop requisite infrastructure as Ethanol is Hygroscopic and also a Class A product with high Flash/Fire point.
• Manufacture multiplex vehicles.
• Work on 2G distillation, Feedstock's supporting such initiatives with possible partnerships.
• Indian sugarcane Industry is facing acute shortage in manpower to Harvest and its cost. For above a year Industry has realised importance of harvesting machines and have been importing few from China, Thailand etc. Yet the pricing and numbers are key to its propagation. India being the second largest producer of cane is lagging in bringing Innovation and building patents which also could have been major source of Income.Mahindras have built Tractor based harvesters which is under field tests.
• Yeast and Enzyme market is slowly expanding in spite of Pricing Constraints. Major Players like Novozyme, Genencor, Abmauri, Enzyme India, Richcore life sciences have presence. Yeast, Enzymes and catalysts are key to success of Biofuel production and we need to build this Portfolio as we have competition on Pricing from China.
• Biomass and its abundance is Critical Component to Biofuels production. Apart to Sugarcane, Sweet Sorghum should be propagated by Sugar Barons as its available round the year and same infrastructure could be optimally utilized. Biomass also generates Bagasse for Cogen and also for producing Compostable plastics. We can slowly move towards Butanol from Ethanol in coming years with enough research in place.

Various Revenue Streams

• The IEA says that the sugar sector has a potential to produce 5,100 MW of power through cogeneration, which is 69 percent of total capacity. If the resources and technology are improved, can produce almost 10,000 MW or 40 percent of the country's 2008 power deficit. This Generates almost 5000 Crore worth CER’s.
• The Indian sugar industry has a turnover of Rs. 700 billion per annum and contributes almost 22.5 billion to central and state exchequer every year.
• The enzyme utilization by Sugar Industry: $19M.
• If Sugarcane is successful to be proved as Carbon Sink then possible CDM is in several Millions.
• Employment and revenue in secondary,teritiary functions of Sugar Cultivation,Harvest,Milling,Trade is highest compared to any Food Crop.
• Since Cellulose content is almost double compared to other crops and the possibility of enforcement of usage of Bioplastics opens new avenues as Market is expected to grow at a compound annual growth rate of 129.8 percent in the next five to seven years.
• Fortified Sugar and Low GI Sugar are catching attention of Urban Consumer.

Ethanol infrastructure

• If successfully implemented blending program would enable usage of new flex vehicles which would be a major contributor of Technology and revenue.
• Domestic infrastructure of higher capacities would be required both at Mill, Terminal for blending along with New Pump outlets. Also would require shore tanks and Pipelines with Class A facilities for export Trade.
• Uniform quality Analysis centers at all Distillation centers.
• New Stainless steel Tank Trucks for Transporting Ethanol from Mill to Terminals.
• Fire Safety Centers at all locations of Manufacturing, Blending, Sale.
• Same infrastructure could be used for Butanol.

Role of Renewable in Sugar

• Use solar for seed treatment, Distillation, Sugar milling, Bagasse drying, waste treatment operations.
• Move from Grid based Cogeneration to Storage technologies which would generate higher revenues.
• Use Cellulose to optimize revenues.

Replicating Proactive Brazilian Model

• President Lula's proactive media approach to negate food versus fuel controversy and finding Markets should be replicated by India.
• Australia also has vibrant Sugar Policy.
• Indian Print, Electronic media should be highlighted the negligence of this Huge Potential Industry.
• We should closely work with Policy makers to discuss and bring in Proactive changes which benefit this sector.
• Should if necessary seek legal course to counter actions which are hurting Industry collectively.
• Need to Understand the Importance of building Common Platforms alike Brazil,AU,Cuba etc, as will be easy to Voice Collectively.
• Research and Funding should be given due Importance as we are quite lagging behind the above three and very many others.
• Soil , water and Air should be given attention to better practices, Yields in Sugar. Propagate impact on health by Emissions from Various fuels and also Economics with Crudes impact on national GDP.