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Parliamentary Panel seeks clarification from Govt on cost effectiveness of 2G Ethanol

In a report, submitted recently, Parliamentary Standing Committee flags concerns on Ethanol Blended Petrol Programme which aims at promoting clean fuel and saving foreign exchange 

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The Parliamentary Standing Committee has sought clarification from the Ministry of Petroleum & Natural Gas (MoP&NG) on the cost difference between second-generation ethanol and imported crude oil; one of the primary objectives of the Ethanol Blending Programme (EBP) is to save foreign exchange. 

The Committee submitted its 23rd Report in Parliament recently and flagged several loopholes in the implementation of the government’s EBP in the country and asked the government to make all efforts to intensify the procurement of ethanol.

The EBP aims at blending ethanol with petrol, thereby bringing it under the category of biofuels and saving millions of dollars by cutting fuel imports. Savings due to blending of ethanol for the year 2015-16 was around $353 million. In 2016, the government had fixed the target of blending 10 per cent ethanol, however, later shifted the target to 2022.

While seeking an update on the rate of ethanol blending in the country, the Parliamentary Committee noted that during the year 2015-16, the OMCs were able to procure only 111 crore litres and achieve a rate of 3.5 per cent blending. Further, during the year 2016-17, the total procurement was only 66.5 crore litres achieving the blending of 2.07 per cent. The ethanol blend rate has failed to reach 5 per cent which was set by the government for the EBP Programme.

The Committee was further informed that during 2017-18 the tenders have been issued for 313 crore litres of Ethanol and so far only 3.28 crore litres have been procured. The Committee have been informed that the OMCs are likely to procure close to 140 crore litres and therefore, the procurement is likely to be higher (4%) compared to last year. In light of the Ministry’s submissions, the Committee strongly recommend that the Ministry should make all efforts to intensify the procurement of Ethanol for EBP programme and achieve an increased blending percentage.

Commenting on the Standing Committee’s recommendations, SK Tapuriah, CEO, Avron Chemicals Pvt. Ltd, a domestic ethanol trading company said, “The ethanol blending mandate in India seems to have lost its significance and importance over the last few years. The Ministry of Petroleum and Natural Gas, along with public-sector Oil Marketing Companies have put all their focus on untested and expensive second-generation ethanol, while not providing sufficient impetus for achieving the blending rate through first-generation ethanol - either domestic or imported – which are cheaper than second-generation ethanol and have a proven track record.” 

The Committee further questioned the Ministry on the status of the 2G ethanol plants for which 6 MoUs were signed in December 2016. The Ministry informed the OMCs that, for these 6 2G plants, the approximate expenditure would be between Rs. 800-1000 crore, and that a total of Rs. 10,000 crore would be spent for establishing 12 2G ethanol plants. The timeline for completion of the 6 2G plants was set at 3 years from the date of their approval; statutory approvals and clearances still haven’t been received for any of the refineries.

The Ministry, in this regard, informed the Committee that second-generation ethanol is more expensive than both first-generation ethanol and petrol, but the Ministry was lending support to the EBP Programme as it also addresses the issue of environmental pollution. The Ministry further informed the Committee that, as cost is an issue for 2G ethanol, a viability gap funding scheme is sought to be established to provide financial assistance for 2G plants. 

“Cost is the major issue right now. That is why, there was a meeting of the Cabinet Secretary where he has asked our company to have some pilot plants on commercial scale and we are also coming out with a viability gap funding scheme. As the Secretary mentioned, we are coming with a scheme to make it viable because the cost is an issue right now and cost-wise it is higher than the first generation. The first generation is a molasses based,” an official of the Ministry said.

The Parliamentary Committee, while noting that the Ministry should ensure every effort is taken to increase the blending rate in the country, stressed that the Ministry/OMCs should “seriously look” at establishing 2G ethanol plants to diversify resources for the availability of ethanol. 

The Parliamentary Committee has regularly hauled up the Ministry on the status of the EBP Programme. Earlier, in January 2018, in its Twenty-First Report, the Committee noted that it was “disappointed” as the foundation stone for only one 2G refinery was laid despite the government’s plan to establish 12 2G plants. In its Eighteenth Report in March 2017, the Committee had also stressed that 2G plants should be established without any time and cost overrun, and if there was a shortfall in the availability of domestic ethanol, permission for imports may be given. 

 

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