Meerut, Uttar Pradesh: Amid lush sugar cane fields, shiny industrial equipment and drums of molasses, Bajaj Hindusthan manager Mukesh Bhatnagar believes his distillery can revolutionize energy usage in India. The Union government has agreed as much, calling for 10% of ethanol—derived from molasses—to be mixed with petrol. The problem now lies in convincing states, which reap even more money from another sugar byproduct: the potable alcohol used in liquor.
“More than 90% of the cost of a Rs400 bottle of liquor is excise duty,” said Bhatnagar, the senior deputy general manager for the distillery.
This puts the future of ethanol production in India at an ironic crossroads between consumption and conservation. Ethanol advocates say the Centre needs to bring the states on board, as they oversee the movement and distribution of alcohol and earn lucrative duties along the way.
Seeing they have much to gain, sugar producers have long backed a nationally mandated policy on ethanol, or ethyl alcohol, a renewable fuel source that, when blended with petrol, enables cars to run more efficiently. Ethanol is produced from the fermentation of sugars such as corn, sugar cane, grains and beet. Molasses—a byproduct in sugar manufacturing—is the primary source in India.
Ethanol production from corn and wheat in the US and Europe, respectively, has caused widespread debate about the impact on world grain prices and the food supply. In India, says Ravi Gupta, president of the sugar and alcohol division of Bajaj Hindusthan Ltd, that is not a concern as it is not an either-or situation. “Fuel ethanol makes eminent sense, because here ethanol is made from a byproduct of the sugar industry,” Gupta said.
India now imports 70% of its crude oil supply and the number of cars nationwide has more than doubled in the last decade. With power and energy consumption rising steadily, analysts say one viable solution to India’s growing demand for energy—both environmentally sound and linked to the development of the rural economy—lies in sugar byproducts, namely molasses and sugar cane juice.
But molasses also produces the alcohol that goes into potable liquor, while regulatory structures make it more profitable to allocate alcohol to the potable alcohol industry over the industrial power and fuel sectors. Today, more than one-third of alcohol produced in India is allocated to potable alcohol and then sold to breweries and makers of spirits.
States prefer to maximize revenues rather than allocate alcohol for fuel ethanol, with Tamil Nadu the most resistant to the 10% blending policy, said Arvind Mahajan, executive director of advisory services for KPMG Pvt. Ltd, which authored a recent report on India’s sugar sector.
Calls to the Tamil Nadu state excise board went unanswered; at the Central level, the joint secretary for biofuels and the petroleum secretary could not be reached for comments by phone.