India is set to double its blending in the 2018-19 (October-September) season and achieve an 8% blending of ethanol with gasoline following government incentives such as making a higher price mandatory to be offered by state-owned oil companies to sugar mills, industry officials said Tuesday.
India, the world's second-biggest sugar producer, has set a target of achieving a 20% ethanol blending target by 2021-2022.
Analysts said that a boost in the ethanol blending programme would help absorb surplus sugar production in case of a glut and also ensure price stability.
India is set to produce 31.5 million mt of sugar in 2018-2019 (October-September) against an estimated demand of 26 million mt.
On October 1, India's opening sugar stocks stood at 10.7 million mt.
Sugar mills received supply order of 1.5 billion liters in the last 2017-2018 fiscal year, accounting for around 4% ethanol blending.
The Indian Sugar Mills Association said that mills had already received supply orders from oil marketing companies for 2.6 billion liters since the current season began in October.
ISMA expects the ethanol supply order to be around 3 billion liters by the end of the current sugar season in September, reaching 8% blending level.
The existing ethanol blending capacity will be enhanced in the next two years through the addition of new and expanded capacities, riding on the government's soft loan offer and higher ethanol price, ISMA said.
Earlier this year, the government approved a Rupees 44 billion ($555,826) loan package for building ethanol production capacity to absorb the surplus sugarcane supply. The package will bear interest subvention of Rupees 13 billion over a five-year period, including a moratorium period of one year.
In September, the government approved an over 25% hike in the price of ethanol produced directly from sugarcane for blending in gasoline to cut surplus production and oil imports.
The ethanol supply could be around 5 billion-6 billion liters by 2020-2021.
"We are in a position to not only cross 10% blending in the country but even think of achieving 20% blending before the targeted year of 2022," ISMA President Gaurav Goel said.
Goel said the spurt in ethanol production in the next two years would reduce gasoline consumption, and help reduce environmental pollution.
The top three ethanol-producing states -- Uttar Pradesh, Maharashtra, and Karnataka -- could start with the 20% blending program in the first phase in 2019-2020 and roll it out across the country the year after, Goel said.
