With climate cha­n­ge and escalated pollution levels being amongst the most pressing problems for India dom­e­stically, the country has ta­ken significant strides by ta­pping into its renewable energy sources and technology to cut its carbon footpr­int. Over the last few yea­rs, the nation has witnessed a tectonic shift in its transpo­rt sector with the introd­u­ction of bio-fuels like et­h­a­n­ol that are indigenous, non-polluting and renewable.

This, coupled with the impending national policy on bio-fuels and accelerated economic growth rate, indicate that India can easily slash its dependence on energy imports and reduce carbon emissions. Now, with the government battling for a robust policy on second generation bio-fuel – ethanol – there are multiple challenges that need to be addressed before forming a future roadmap.

It is projected that CO2 emissions can be reduced up to 10.41 million ton CO2 by 2021-2022 at a 20 per cent blending rate of ethanol. Over the last 3 years, India’s crude oil imports have been steadily rising, with the country importing more than 80 per cent of its crude oil demand through imports.

In 2009, a national policy on bio-fuels was set to slash future carbon emissions and dependence on foreign crude oil, with a target of 20 per cent blending of bio-fuels – bio-diesel and bio-ethanol – by 2017.

However, India still hasn’t managed to achieve a blending rate of even 5 per cent for ethanol. In 2017-18, India is expected to produce 2,900 million liters of ethanol, of which 55 per cent (1,600 million liters) is expected to be used for fuel blending purposes. This ag­a­­inst a demand of 3,130 million liters as set by oil marketing companies.

If the supplies are as stated above, India could achieve an average blend rate of 5.1 per cent, and th­ere is also demand from the competing chemicals and potable alcohol sectors, wh­i­ch must be taken into acco­unt. In addition to this supply deficit, certain market and regulatory hurdles also contribute to limiting the potential of the country’s ethanol blending programme.

Experts have attributed ethanol shortage with an increased demand from chemical and beverage industries. This shortfall in ethanol supply for blending has intensified India’s desire to shift to second generation bio-fuels.

While first generation bio-fuels are made from sugars via molasses, advanced bio-fuels are made from lignocellulosic biomass or woody crops, and agricultural residues.  While shifting the gears from first generation to second generation is a positive move, it has its own set of challenges.

While countries like Brazil, Sweden and the Philippines have taken a lead in second-generation ethanol; India too is aspiring for a move in that direction.

With a solid agrarian background, India’s rural sector is poised for a major makeover with the emergence of bio-fuels as a major catalyst of this change. But the bigger challenge here is to introduce, implement and harness technologies that are cost-effective and impact. Simultaneously, they must also decrease fiscal burden, lower subsidies, and scale down import of oil for the country.

Even as plans are being made and MoUs signed for bio-refinery plants to be rolled out in the country to facilitate 2G ethanol, it is the country’s upcoming national policy on bio-fuels, which will set the pace for future action.

While it’s expected that there will be seamless inter-ministerial coordination and further reduction on red tapism over ethanol, a greater thrust has to be given to the bigger picture. The usage of first generation ethanol should be continued while crafting and implementing strategy for the production of 2G ethanol. India must ensure that the focus remains solely on ensuring an increased ethanol blend rate in order to reap its environmental benefits.

The Indian government is set to introduce a slew of positive measures in the upcoming national policy on bio-fuels. There are indications that a viability gap-funding scheme will be introduced in order to enable commercialisation of 2G plants by providing financial incentives.

Similarly, it is also expected that oil marketing companies will provide an offtake guarantee for 2G ethanol for a period of 15 years. Besides this, with India recently signing the Biofuture Declaration at UNFCCC Conference in Bonn, Germany, in November 2017, international collaborations with foreign players is also set to be ramped up.

This is where the United States can play a crucial role in enabling the production of ethanol from existing first-generation sources, while simultaneously supporting the move to second-generation ethanol by providing technological assistance. It is also essential that India looks to alter its ethanol pricing policy (currently fixed price is determined by government on an annual basis), by utilising consistent economic principles, in order to ensure predictability for eth­anol suppliers and buyers.

The Indian government has clearly indicated that second generation bio-fuels using biomass as feedstock are the topmost priority; however, a lot more research is required in these areas, in order to ensure that these 2G plants have the potential to scale up and be commercially viable at the earliest.

Currently, with the proposed VGF sche­mes, coupled with experience from other cou­nt­ries around the world, it is indicative that the price for 2G ethanol would be set at a significant premium. To strike a balance, the way forward should be to ensure that there is a healthy bio-fuel mix (according equal importance to all forms of ethanol, be it first generation or second generation), with the aim of maximising the blend rate of ethanol, in order to ramp up the use of a cleaner, greener fuel, whi­ch can help reduce emissi­ons and improve air quality.

Similarly, India should also work towards understanding how other countries have implemented successful blending programmes, and what can be learnt from the same.

Countries like the Phi­lippines worked to consiste­ntly ramp up domestic production capacity of ethanol while sourcing ethanol fr­om the international market to fulfill the shortfall in demand and supply, in the short- to medium-term. It ensured that the Philippi­nes’ domestic ethanol blen­ding programme strengthened and the country was able to achieve energy self-sufficiency at an expedited rate.

Thus, while there is huge potential for India’s domestic bio-fuels sector, India must learn from the experiences of other bio-fuel economies and hope to stabilise its ethanol blend rate in order to maintain a sustained level of growth.