Thursday, July 10, 2008

Why Hasn't Congress Decided to Allow Imports of Sugar Cane-Based Ethanol From India to Reduce Prices at the Pump??
Ethanol from sugarcane can provide energy security

By Samir Somaiya

Indian Financial Express

December 23, 2007

Ethanol is a versatile and useful product. It is produced from renewable resources such as sugarcane, corn etc, and has been used in India as a feedstock for the production of chemicals and in the manufacture of potable liquor. Rising oil prices have made energy security even more important for India, since the country imports a major chunk of the 8.6 million tonne of its petrol requirements.

This despite the fact that India can substitute a sizeable portion of its oil needs through ethanol. Brazil uses car engines that can use hydrous ethanol, anhydrous ethanol, petrol and their combinations by means of a simple sensor that adjusts the excess air fed to the carburettor based on the CH ratio of the fuel. India could also introduce these engines, and over time, technically adapt to ethanol as a fuel. Ethanol is also a feedstock for chemicals. Surplus ethanol availability would further encourage the production of chemicals from renewable resources.

India is the largest sugar consumer in the world today. Indian sugarcane is currently used to produce sugar for our domestic consumption as well as for exporting to other countries (whenever the government policy permits it and the prices are favourable) and its byproduct (molasses) is used for fermentation to produce ethanol. The ethanol is used to meet the demand of the potable and chemical industries in the country.

India is producing more sugar than it needs, by more than 8 million tonne, and most of this is stored in warehouses. This could otherwise have been made available for a programme in fuel ethanol to take place.

Current scenario: surplus of sugarcane or sugar?

India is producing too much sugar as compared to its demand. The resultant oversupply is creating a downward pressure on the market price of sugar, affecting the economics of the sugar industry and consequently the livelihood of millions of sugarcane farmers that the industry supports.

Sugarcane surplus is welcome: Sugarcane surplus needs to be looked at as an 'energy' surplus.

Surplus cane can be used to produce ethanol as is done in Brazil. Instead of storing millions of tonnes of sugar in a falling market and exporting the balance at very low international prices, the same could instead be used to produce a few billion litres of ethanol. In terms of energy value, this would be equal to a little over 3 million tonne of petrol (over 30% of our current petrol consumption).

Everyone benefits-the farmer, factory, consumer, and the country: The farmer and factory are at the mercy of the 'sugar' cycle. So long as ethanol and electricity cogeneration are 'byproducts' of cane milling, sugar will be the primary source of revenue and risk. Sugarcane needs another outlet (ethanol) to be produced as a substitute to sugar so that the factory and farmer are 'de-risked' from cane. Currently, ethanol can be produced from sugarcane and sold at a price so that all gain, the farmer, the factory as well as the consumer!

India will benefit by replacing over 30% of its current petrol requirement, saving valuable foreign exchange, and addressing the country's energy security. But this is not all. Further changes in the improvement of cane quality and cane yields, coupled with changes in public policy could replace almost all current Indian consumption of petrol.

Incremental changes can make a big difference

Biology, agronomy and biotechnology: Currently, the average yield per acre in India is 70 tonne/hectare, and the pol% (a measure of sucrose content) is 12.2%. Better varieties coupled with experiments in agronomy can result in better yielding crops (yield and pol%). Research is to be done in new sources of ethanol (tropical beet, sweet sorghum and cellulose).

Farm extension services: Developments in the laboratory have to be taken to the field by means of extremely good farm extension services. An entire ecosystem comprising relevant advice, cane varieties, inputs delivery, microfinance and support is very essential.

At the Godavari Sugar Mills, in North Karnataka, we have created such an infrastructure and have achieved average yields of 85 tonne per hectare and pol% cane of 13.7%. This is substantially higher than the Indian average of 70 tonne/hectare and 12.2% pol% cane.

Public policy: If ethanol has to be used as chemical and transportation feedstock, there need to be policies in place to encourage it. Ethanol is a renewable feedstock. It also contributes to a reduction in global warming, since sugarcane grown will be a carbon dioxide sink. The government has taken a step in the right direction by announcing 5% blending from October 2007, and 10% by October 2008. However, these percentages must not limit our imagination on the degree of substitution that we can achieve, and could instead serve as a minimum mandate.

Efficient markets: Molasses and ethanol cannot be transported freely across state borders. Whereas the European Union continues to integrate and expand as an economic unit, India continues to function in the form of mini states within a state.

Sugar companies must be free to optimise production between ethanol, sugar or any other product. Markets must determine whether the sugarcane juice will flow to ethanol or sugar production or any other new product. Prices will determine new equilibria. Similarly, companies must be free to decide whether to use ethanol for chemical or fuel needs.

A possible future

* Now National target

* Area under cane (million hectare) 5.4 5.67

* Cane yield (tonne/hectare) 70 80

* Sucrose content (pol%) 12.2 13.2

* Increase in sugar stocks/exports 8.3 0in year (million tonne)

* Is total domestic sugar, industrial Yes Yesethanol and potable demand met

* Ethanol excess available for fuel or 0.8 10.1chemical programme (million tonne)

Possible criticism and responses

* Whether India will always have a supply surplus of 8 million tonne a year? Supply of sugarcane will be influenced by demand (which will determine price) and climate. Climate shocks can affect sugarcane availability. In the past many years, government interventions in cane price and policy regarding sugar sale have exacerbated the volatility of the sugarcane planting cycle. With a healthy demand for sugarcane derived products (sugar-local or international, ethanol-for fuel, potable or chemical use), the price of the end product would remain healthy and cane price and availability would be assured.

* As the Indian economy grows, how will the growing need of energy be met? Firstly, the current analysis reflects an improvement over current ethanol availability from sugarcane. The targets set are still lower than many have achieved. Further, in the future, other sources of ethanol such as sweet sorghum and cellulose could be developed to meet increasing demand.

* Whether the targets set are achievable? There are many companies and areas in India that are surpassing the set targets of yield per acre and pol% cane. Certainly, climate and soil do play an important role, but interventions of microfinance, input supply, biotechnology and cane extension can certainly help in achieving better results.


Cane yield (tonne/hectare) Pol% Cane
* Now 70 12.2
* National target 80 13.2
* Godavari 85 14
* Best 100+ 15+

* Whether cars can run on ethanol? In a country like Brazil, there is a sensor that is inserted in car engines to measure the C ratio. The excess air is fed to the carburettor accordingly and the car is capable of consuming ethanol, gasoline, or a combination of the two. Just as LPG driven cars have spread in India, these cars could also spread and increase in popularity in the future.
Future changes

Ethanol for fuel is currently planned to be distributed through oil companies. There is no reason for ethanol to be distributed only in this manner. Sugar companies could supply directly to 'fuel' pumps or set up their own distribution systems. Earlier distribution systems were based on centralised refining. The future will belong to distributed production and generation. Our laws and logistics will have to be adapted to reflect the new reality and cope with new challenges.


There will be plenty of sceptics who will find these results impossible. However, we must remember that we are planning for the nation's future and not simply for the next one year.

Since incremental changes can make a large impact on resource availability, there is a need to bring together a common will and diverse expertise. The results cannot be achieved nationally if approached independently. Governments, research institutions, universities, companies, bankers, NGOs and farmers have to work together to achieve the goal. It is in our best and long term interest.

The writer is executive director of the Godavari Sugar Mills Ltd and vice-president of the Indian Sugar Mills' Association


India's States in Favour of More Ethanol Blending

By Nigam Prusty


INDIA: October 4, 2007

NEW DELHI - India's states have agreed to 10 percent blending of ethanol with petrol from October 2008 and are in favour of allowing sugar mills to directly produce the biofuel from sugarcane juice, the farm minister said.

"We have reached general understanding with state governments on 10 percent blending of ethanol for fuel to be made mandatory from October 2008," Sharad Pawar told reporters on Wednesday after meeting state officials.


Pawar said there was also agreement that producing ethanol directly from sugarcane juice should be permitted.

India currently allows five percent blending of ethanol made from molasses with petrol. The federal cabinet will now take up the issue of doubling this to 10 percent.

Impediments on the free movement of denatured ethanol and local taxes should also be scrapped, Pawar said, saying the moves were supported by state officials.

Pawar earlier said that directly converting sugarcane juice into ethanol probably offered the country's troubled mills a way out of recurring problems.

"The answer to the cyclic problem faced by the Indian sugar industry probably lies in conversion of surplus sugarcane directly into ethanol," he said.

He added ethanol production should be controlled in years when cane supplies were tight so sugar output was not affected. [THAT WOULD BE WISE.]

India's sugar production in the new season that began on Oct. 1 is expected to top 29 million tonnes, up from a record 28 million tonnes, the minister said.

With domestic consumption estimated at 19 million tonnes and exports placed at 1.5 million tonnes, the country is expected to have a huge opening stock of 11.9 million tonnes on Oct. 1.

"The sugar industry in India is facing an unprecedented crisis situation," Pawar said, adding that domestic and international prices were unlikely to improve much in the new season.

Sugar is one of the few industries which is still under government control. It fixes prices which mills have to pay to cane farmers and also administers policy on setting up new mills.

"The time has now come to review the controls and move towards deregulation," Pawar said, but he offered no details.

Pawar said even though India has tremendous potential to produce and use ethanol as a fuel, policy has not provided the right degree of encouragement.

Sugar mills have been shying away from investments in the industry due to complex taxes imposed by some states, he said.


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