2. Indian Ethanol Scenario - Opportunities & Challenges by Jai Uppal, Consultant B.Sc. Chem. Engg., M.S.E. (Michigan, USA) F.I.E.. L.M.I.I.Ch.E., L.M.I.M.A. (Advisor -Renewable Energy) ( Winrock International India) jaiuppal @ yahoo.com (M)+919811171121 Petrofed – April 13, 2006

3. Indian Scenario – Historical The Indian Ethanol Program started during World War II - there was a shortage of petrol (gasoline) & ‘Power Alcohol’ was encouraged by the British. The ‘Oil Shock’ of mid 70s saw a revival of interest in Ethanol. Successful trials in 1979 - IOC/IIP on 15 cars found Ethanol (10% & 20% blends) suitable Large number studies, reports, trials

4. Indian Initiatives Finally (April 2001) 3 successful Pilot Projects using E5 – 2 Maharashtra & 1 UP – mixing at oil depots and supply to nearly 300 petrol pumps with supply from U.P. – 1500km Announcement of December 10, 2001 Policy announced to blend 5% ethanol with petrol Inter Ministerial Task Force constituted Rs 4 Cr.(US$ 1 Mill.) for R&D on Ethanol diesel blends Amend Sugar Development Act for financing Ethanol Announcement of March 20, 2002 Dr SJ Chopra Technical Committee Report - Ethanol most appropriate oxygenate for India

5. Indian Initiatives –Auto fuel Policy of August 2002 – “ The development of technologies for producing ethanol and bio-fuels from different renewable sources can play a major role in commercialization of bio-fuels vehicle in the country, which should be encouraged by providing R&D & other support through suitable fiscal incentive.” –September 13, 2002 Notification making 5% Ethanol blending in gasoline mandatory in 9 States (Sugar producing States)& 4 UTs by January1, 2003 - a notice period of just 3.5 months.

6. Indian Initiatives Amendment to the Sugar Development Fund to enable access to fund for producing Ethanol from Alcohol at interest rate of 6% - 2002. Budget of Feb 2003 -Excise duty concession of Rs 0.30 per litre valid till Feb 29, 2004 – year to year validity

7. Indian Initiatives Program Operated in FY 2003-04 –290 mill L Ethanol blended in 5.8 bill L of petrol in 9 States ED incentive lapses March 2004 and oil Companies stop purchases Draught & shortage leads to price rise of molasses/Ethanol in Maharashtra, Karnataka, AP etc. Oct 2003 onwards No other Feedstock developed ED incentive not taken up the interim budget of Mid 2004 & not introduced in any subsequent budget – after New Government takes over

8. Indian Ethanol Status Notification regarding mandatory provision made conditional with new notification Oct 2004– blending subject to availability, market forces & import parity price ED incentive again not introduced in Feb 2005 and in Feb 2006 MOU in 2005 of Oil Cos. with ISMA as nodal body representing Ethanol Manufacturers to start the program and price fixed at Rs. 18.75 per litre

9. Indian Ethanol Status Task Force set up to study the Ethanol Blending Program Tenders again floated in December 2004 kept pending At present Blending on in UP, Punjab, Karnataka, Tamil Nadu (partial). Price of crude touches above $60 a rise of 6 times since end of 90s but not ready to give any increase to Ethanol manufacture Imports of crude rise to $ 44 billion 2005-06 (70% import)

10. Indian Ethanol Status More than 300 units with total installed Alcohol capacity is 3.5 billion L with 40% to 45% utilization before Ethanol was introduced. Main use of alcohol was Potable and ABC. The health of independent alcohol units was not good. Substantial Progress made - nearly 1500 mill L Ethanol capacity built up since 2003 with an investment of About Rs 10,000 mill. This capacity can meet the demand of 15% blend.

11. Challenges Vision and policy lacking in for Renewable Biofuels Important because with imports of crude oil at nearly $44 billion and BOP becoming increasingly adverse at an average of less than $60/bbl It has been predicted that Indian economy will be seriously jeopardized if prices go above $80. With announcement of Iran on Uranium enrichment on April 11, 2006 the prices will harden. Any pre-emptive action or political instability can easily push the prices to $ 100 barrier Investment in Biofuels is a risk management option

12. Challenges Catch 22 situation Low capacity (adverse economies of scale)due to low demand – higher cost of production. Policies regarding sugarcane limiting direct use of sugarcane for Ethanol Changing policies regarding land holding limit the potential Open / liberal policies of State Governments regarding movement of alcohol and feedstocks Increase coordination between stakeholders

14. Drivers for Brazilian & US Ethanol Program Energy Security, Rural Employment & Environment USA –Provides excise incentive to Ethanol -US$ 0.50 per gallon –Banning of MTBE & replacement with Ethanol as oxygenate mandatory Brazil –does not provide any subsidy to Ethanol Program as it is competitive to Gasoline if crude oil price is US$ 26 per bbl because of competitive cane prices – 50% of Indian Prices. –Mandatory blending of 20 to 25% of Ethanol with petrol

15. Ethanol Potential in India The ethanol program in India is dependent on molasses from sugar industry – major constraint India has lots of rotten and out of date food grain. 4 mill tonnes of grains can produce 1.5 bill L of Ethanol per year Sugar occupies about 4 mill ha of land which is less than than 7% irrigated land An increase of 1 mill ha will produce 75 mill T of sugarcane that can give additional 5.0 bill L of Ethanol This can also be achieved by raising the yield to 100T/Ha

16. Ethanol Potential/Benefits - India Once Biomass to Ethanol is commercialized it can become a source of almost limitless source of Biofuels. Ethanol with a consumption of 4 to 5 Bill. L (20-25% blending by 2015) Can have a retail turn over of Rs 140,000 million per year Export Potential of 4 to 5 bill L. Total Potential of Ethanol – 10 bill. L by 2015 India has developed alcohol technology which is sold all over the world – dehydration technology licensed

17. Benefits to Indian Economy Enhancing Energy Security – management of risk Rural employment and development of economy Large multiplier/low capital intensity/higher employment per unit capacity Decentralized Environment and Climate change Increases octane number Safer/cheaper Oxygenate as it replaces MTBE