India's Energy Dependence and Strategic Reserves

India's reliance on energy supplies from West Asia was highlighted following an escalation in regional conflict. Over half of India's oil needs are sourced from West Asia, and the country was left with crude oil stocks for 33 days and transport fuel for 25 days during the crisis. To improve energy security, India can either build strategic storage or adopt alternative fuels like ethanol, green hydrogen, and biogas. India's strategic petroleum reserve (SPR) only covers 7-9 days of demand, and expansion plans are delayed due to land issues.

Ethanol as an Alternative Fuel

• India achieved a 20% ethanol blending target ahead of the 2030 deadline, which benefits local farmers and distillers.
• The government plans to expand the Ethanol Blended Petrol (EBP) program to 30% or adopt a flex-fuel policy.
• Flex fuel vehicles require tax incentives to be competitive with electric vehicles.
• Industry leaders advocate for a clear demand trajectory for ethanol, suggesting a phased roadmap for higher blends beyond E20.

Challenges in Ethanol Production and Utilization

• There is a supply-demand mismatch in the ethanol industry, with distilleries operating at low capacity utilization due to insufficient offtake by oil marketing companies (OMCs).
• Overall capacity utilization for distilleries is at 45-50%, with grain-based facilities operating at a higher rate than cane-based ones.
• State-controlled pricing and input costs, such as sugarcane prices, affect ethanol profitability.
• To address concerns over mileage and vehicle damage, the government requires refiners to sell E20 petrol with a minimum RON 95 octane level.

Decarbonization and Environmental Concerns

India's ethanol policy focuses on volume rather than carbon intensity, which is a concern as the country explores sustainable aviation fuel, green hydrogen, and carbon markets. There are environmental concerns about the land and water usage for ethanol production, and a shift towards second-generation (2G) ethanol processed from waste is suggested as a solution.

Second-Generation Ethanol Initiatives

• India has initiated 2G ethanol projects, such as Bharat's plant in Odisha and Indian Oil's plant in Panipat, though they face utilization and cost challenges.
• 2G ethanol is more ecologically favorable but incurs higher capital and operating costs, with no government price incentives.