Mandates and measures

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India is following Brazil’s steps and increasing the ethanol blending mandate in the country.
Brazil began commercial ethanol blending in gasoline in the 1970s, as a response to the sudden increase in crude oil prices, and with a view to reduce the country’s dependency on imported petroleum.
In the 1970s the US began commercial ethanol blending petroleum for the same reasons as Brazil.
Today, together with the US, Brazil is one of the major ethanol producers in the world – a fact that also influenced its ethanol-petroleum blending decision.
India is a net importer of crude oil, commonly from the Middle East, and ethanol is less expensive than other octane enhancers.
Ethanol is indeed used as an octane enhancer for petroleum and its use was promoted to mitigate the use of lead in gasoline.
By using ethanol as an oxygenate, carbon monoxide and other emissions can be controlled. In addition, ethanol has physicochemical properties that make it compatible with petroleum.
Promoting ethanol blending in petroleum is also intended to boost India's agricultural and industrial economic sectors.
Ethanol blending in India
India began an ethanol blending pilot in 2001. As of 2003, a 5% v/v ethanol blending mandate in gasoline (E5) started in Andhra Pradesh, Maharashtra, Punjab and Uttar Pradesh. Later, it expanded to Tamil Nadu, Goa, Haryana, Gujarat, Karnataka, Chandigarh, Pondicherry, Daman Diu and Dadra Nagar Haveli.
In 2006, E5 was established in most states. Logistic limitations and inter-state taxes delayed compliance with the 5% v/v mandate throughout the country until 2008 and beyond.
Since 2013, the ethanol mandate was amended from E5 to a national average ethanol penetration of 5% v/v.
Until the end of fiscal year 2014, India produced less than 2 billion litres per year of molasses-based ethanol, a byproduct of the sugar industry - a total which was lower than the theoretical demand for a 5% v/v average ethanol penetration.
This situation resulted in some changes in the government’s policies related to ethanol supply.
These changes included reintroducing a regulated price mechanism for fuel ethanol, establishing alternative routes for ethanol production including cellulosic ethanol and petrochemical-based ethanol, reducing goods and service tax from 18% to 5% for fuel ethanol and amending the regulation of fuel ethanol, whereby movements across states should not be restricted.
In 2021, the Department of Food and Public Distribution also extended financial assistance for companies setting up new, or expanding existing, grain-based ethanol production facilities.
These regulations helped increase the country’s ethanol production capacity.
In 2022, India’s annual ethanol production capacity of molasses-based distilling reached 5.69 billion litres with grain-based distilleries producing 2.8 billion liters.
As a result, the total ethanol production capacity was 8.49 billion litres, more than four times bigger than the country’s total ethanol production in 2014.
In 2023, the ethanol production capacity in India was above 10.82 billion litres per year.
In addition, oil marketing companies planned to set up about 10-15 new grain-based ethanol production plants with a combined capacity of 1-1.5 billion liters/year.
In May 2022, national average ethanol penetration reached 10% v/v, and the National Policy on Biofuels 2018 was amended, bringing forward E20 implementation from 2030 to 2025.
In the ethanol supply year 2022-2023, average ethanol penetration reached 12% v/v, and at the end of 2023, E20 was available at 9,300 fuel retail stations across the country.
India’s ethanol production is lower than its consumption. However, the fuel ethanol trade is restricted. To date, only domestic fuel ethanol is consumed.
As a result, penetration highly depends on the domestic supply.
On the other hand, imports of other grades of ethanol are permitted. Indian fuel ethanol production has grown gradually in recent years, totaling 6.4 billion litres in 2023, a 21% increase compared with 2022.
Fuel ethanol production is estimated to have represented about 75% of the total ethanol production during the last 12 months.
Indian fuel ethanol demand during 2023 was 6.8 billion litres, a 24% increase compared with 2022. Figure 1 shows a marked upward trend in fuel ethanol consumption in India from 2012.
Fuel ethanol consumption is estimated to have represented about 71% of the total ethanol consumption during 2023. In March this year, India’s Ministry of Petroleum and Natural Gas officially launched sales of E100 (pure fuel ethanol) in 183 fuel retail stations across five states.
This move comes after in January 2024 the Indian Oil Corporation Ltd. agreed to sell E100 for flex-fuel or ethanol vehicles in 300 fuel retail stations.
Ethanol mandates in India, a comparative look at Brazil
At a rate of up to 27.5 v/v, Brazil has the highest ethanol blending mandate in the world.
Brazil offers lower taxation on ethanol and permits its use in carbon reduction credits.
These initiatives help keep ethanol prices competitive, although sugar, corn and petroleum prices also play a role.
Notably, India's E20 ethanol blend quality specifications are more stringent than Brazil's E27/E25 ethanol blend quality specifications – for example, in terms of minimum octane numbers, maximum sulphur content and maximum olefins content.
This is related to the availability of ultra-low sulfur fuels in India, where refineries have been modernised and have greater capacity and complexity than those in Brazil.
In 2023, demand for gasoline C (a blend of anhydrous ethanol and fossil gasoline) in Brazil averaged 793,200 barrels per day (b/d). A similar level was reached by India in 2022, with 796,000 b/d.
Both countries have reached record levels of petroleum consumption in recent years and the trend is forecast to increase in the short- and medium-term. Likewise, both countries are large export producers of agricultural products, although their main exported products are different.
Brazil produces and consumes at least four times more fuel ethanol than India. In Brazil, in addition to the 12.4 billion litres consumed in the E27/E25 ethanol blend, 16 billion litres of hydrous fuel ethanol (E100) were consumed by flex-fuel vehicles.
Fuel ethanol production and consumption volumes are shown below. 92.3% of the country’s ethanol is produced from sugarcane.
Other feedstocks are molasses (3.8%), corn (3.8%) and others, including bagasse for cellulosic fuel (0.06%).
In addition, Brazil's ethanol production is higher than its ethanol consumption. As a result, Brazil is a net ethanol exporter, with volumes totaling 2.5 billion liters in 2023.
Brazil is much more likely to increase the ethanol blend mandate to 30% v/v (E30) in the future than India, because India is a net importer of ethanol.
India will demand above 38 billion litres per year if the E30 mandate is implemented and if the ethanol production capacity is close to 11 billion litres, then investments are needed to increase the country’s supply.
On the other hand, Brazil's ethanol production capacity is above 60 billion litres per year and idle production capacity is around 40%. In addition, ethanol content in petroleum samples taken by SGS averaged 10% v/v in India and 29% v/v in Brazil in 2023.
Many automakers in India, mainly in the passenger car sector, are expanding flex-fuel technology, but this has only just begun.
In October 2022, Toyota launched a flex-fuel strong hybrid electric vehicle pilot in India, combining a flex-fuel engine and an electric powertrain. The same technology was also introduced in Brazil, at an earlier stage.
In Brazil, flex-fuel vehicles were introduced to the market in 2003. Their share increased to 72% of light passenger vehicles and 48% of the light commercial vehicle fleet in 2023.
Projections and challenges
Ethanol blending in petroleum faces some challenges on the feedstock supply side.
At the beginning of last December, India's government decided to ban the use of sugarcane juice and syrup to produce ethanol and opted for them to be converted to sugar instead – because domestic sugar production may not have met the demand.
At that time, oil marketing companies had issued fuel ethanol tenders. Some days after the ban, the Indian government reversed it.
This allowed sugarcane juice and B-heavy molasses, co-products of the sugarcane process, obtained from the second step of crystallisation (second molasses), to produce fuel ethanol.
However, the amounts that can be used to produce fuel ethanol were capped and those maximum amounts were never announced publicly.
To further ensure that domestic sugar production will not be disturbed, the use of sugarcane juice and B-heavy molasses in the production of rectified spirits and extra-neutral alcohol are not permitted.
India also uses damaged rice and other surplus grains available to produce ethanol. However, this too was cut last year, due to a failed harvest amid weather changes.
In addition, the fuel ethanol trade is restricted, with imports and exports only allowed on a case-by-case basis. Only industrial and potable ethanol can be exported or imported.
The government is contemplating increasing the blending mandate to E30 in the long term (after 2030), following Brazil’s path in the framework of the 2023 launch of the Global Biofuels Alliance, but no official announcement has been made.

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