India is one of the largest importers of petroleum products in the world. India imports 82% of crude oils from countries such as Iraq, Saudi Arabia, United States, UAE, etc. During 2020-21 India imported 185 million metric tons of petrol, worth USD 55 billion. Due to the lack of sufficient petroleum reserves in the country to meet the growing domestic demand, India has to increase crude oil imports every year.
In order to address the issue of increasing oil and petroleum imports, the Government of India is exploring several means such as enhancing renewable energy production, using ethanol as an alternative fuel to petrol, etc. The government has set a target to achieve 20% ethanol blending with petrol by FY24. As the cost of ethanol is less than that of petrol, this would help the government to save around USD 4 billion every year on petroleum imports. Moreover, the usage of ethanol as fuel also helps to reduce environmental pollution as ethanol is less polluting when compared with petrol.
The abundant availability of food grains and sugar cane, and the government’s push to completely replace petrol with ethanol in a phased manner are encouraging many entrepreneurs across the country to explore opportunities in ethanol manufacturing and start ethanol production plant.
Helping entrepreneurs planning to setup ethanol production plant, let us discuss about the government incentives, raw materials and machinery required, and other factors involved in successfully starting and running the ethanol production business.
The government provides financial assistance for entrepreneurs setting up new distilleries or expansion of existing distilleries to produce ethanol from grains or sugarcane. The assistance includes 6% interest grants per annum or 50% of the rate of interest charged by banks that are eligible for refinancing from the National Bank for Agriculture and Rural Development for a period of 5 years. The financial assistance is applicable to only those industries which supply at least 75% of the produced ethanol to Oil Marketing Companies.
The government recently increased the prices of ethanol extracted from sugarcane to Rs. 63.45 per litre from Rs. 62.65 per litre, a raise by Rs. 1.47 per litre. The price of ethanol from C-heavy molasses has been increased from Rs. 45.69 per litre to Rs. 46.69 per litre, while that of ethanol from B-heavy molasses has been from Rs. 57.61 per litre to Rs. 59.08 per litre.
The revised prices will be applicable from December 2021. The Oil Manufacturing Companies will procure ethanol from ethanol manufacturers as per new prices set by the government.
The raw materials required to start ethanol manufacturing are:
- Pearl millet
- Sugarcane bagasse
Infrastructure & Machinery
- Grain storage and cleaning plant
- Grain grading and milling plant
- Liquefaction plant
- Distillation plant
- Spent filtration plant
- Spent wash evaporator
- Cooling system
Apart from these, some of the other infrastructure required include steam boilers, effluent treatment plant, etc.
Applications of Ethanol
In the current context, the primary application of ethanol is to blend with petrol and diesel. In addition to blending with petrol and diesel, ethanol is also used in downstream chemicals manufacturing and alcoholic beverages manufacturing.
Advantages Of Using Ethanol As Fuel
1. Ethanol fuel with a 113 octane rating, is one of the top performing fuels in the market. Oxygen present in ethanol molecules permits the engine to combust the fuel completely, leading to fewer emissions.
2. Ethanol-blended fuel acts as a gas-line antifreeze and prevents the wintertime problem of starting a motorcycle.
3. It is considered as renewable fuel as ethanol is produced from plants.
4. As ethanol-blended fuel does not leave gummy deposits, it maintains the fuel system tidy for optimal performance.
5. Usage of Ethanol fuel reduces demand for foreign oil.
6. Ethanol-fueled vehicles emit very less carbon dioxide.
Some of the major by-products produced during the production of ethanol are extra neutral alcohol (ENA), distillers grains, carbon dioxide, etc. ENA is used in the manufacturing of alcoholic beverages, cosmetics, detergents, toiletries, paints, etc. Distillers grains are the primary ingredient of the animal feed. The carbon dioxide produced can be converted into food grade gas that can be used in carbonated beverages.
With the government keen on ethanol blending with petrol and diesel, the demand for ethanol is surging in the country. The requirement of ethanol for blending in petrol and diesel by 2025-26 in India is 1,016 crore litres. However, the current ethanol production capacity in India is 684 crore litres. As ethanol also finds applications in the pharma and chemical industry, the demand for ethanol is going to increase rapidly. To meet the growing domestic demand of ethanol, India has to expedite the production of ethanol in the country.
State Policies to Promote Ethanol Production
The Government of Assam recently released the ‘Assam Ethanol Promotion Policy-2021’ with an aim to attract investments and increase the usage of ethanol in the energy and transportation sectors across the state. The policy which provides financial incentives to industries producing ethanol will remain valid till March 31, 2026. The proposed incentives under the scheme will be applicable only to the industries that sell the produced ethanol to Oil Manufacturing Companies.
Bihar is another state in the country with a dedicated policy for the promotion of production of the ethanol. Bihar is the first Indian state to formulate a policy for ethanol production. Under the scheme, the government provides allows the extraction of ethanol from maize which was previously restricted to sugarcane and provides upto Rs. 5 crore financial incentives. Apart from Bihar and Assam, the state of Uttar Pradesh also put in place similar policy measures to promote ethanol manufacturing in the state. Many other state governments are also considering to come up with dedicated polices to promote ethanol manufacturing.
While ethanol manufacturing offers great business opportunities to entrepreneurs, starting and successfully running ethanol manufacturing plant is not an easy task without assistance from domain experts. If you are planning to start ethanol manufacturing plant, kindly register with SolutionBuggy. We provide you access to trusted and verified consultants who can assist you in setting up the ethanol manufacturing industry.
Ethanol is used as an alternative fuel to petrol and diesel. It is also used in the manufacturing of downstream chemicals and alcoholic beverages.
Ethanol blending refers to mixing of ethanol with petrol or diesel in certain quantities.
Ethanol blending helps to cut-down costs of petroleum imports and reduce environmental pollution.
The government is providing financial assistance to entrepreneurs for setting up new ethanol production unit or for expanding existing plants.
As the demand for ethanol is expected to increase in the country, opportunities for entrepreneurs in ethanol manufacturing are huge.