Ethanol Fuel Debate

The ethanol-as-fuel topic is in the news. Thankfully, it seems to be without too many politicians (for now, at least). And so the points being made by both sides make sense; they are not the usual mudslinging based on one’s political affiliations. I read two such well-written articles on the topic, one by Nithin Sasikumar and the other by Ajit Ranade in Deccan Herald.

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The drive to ethanol didn’t start recently; it has been going on steadily since 2013-14. The E20 target (The number ‘20’ here means 20% ethanol) has in fact been reached 5 years ahead of plan – imagine that, for government execution cutting across parties and spread over a decade! (India reached E10 in 2022; its target is 100% eventually).

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What are the reasons for the ethanol policy? The first one is that India imports a huge amount of oil; and that bill is only going to keep increasing. Saving money and forex was the primary driver. As the ratio of ethanol increases, the savings on that front would increase further. The second reason is environmental – CO2 emissions are lower with ethanol. The third argument is geopolitical security - Ethanol is obtained from crops like sugarcane, rice, wheat and maize; so its source lies within the country’s borders. And fourth, an increase in demand for those crops that generate ethanol adds to farmer income.

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Before we go into the questions being asked, a slight digression. Why so much debate now at E20 if we have been at E10 since 2022? Well, motorists began to notice a drop in mileage (km per liter); and then the fear whether such a mixed fuel could damage the vehicles which were not designed for this fuel mix (Vehicles since 2023 were designed for E20; but those bought before aren’t). And based on these two concerns, motorists ask why petrol pumps don’t offer a choice of fuel (E10 or E20), the way Brazil (another country hugely into ethanol) does? Those are the reasons why the debate entered the public domain.

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Those who question it accept the benefits. They ask questions, going into the details, specifics and second-order consequences. Let us dive deeper.

 

The first question they ask is how much money/forex are we saving? Not just the raw number is rupees/dollars, but more importantly, as a fraction of the country’s fuel bill? The answer to the latter is that from inception (2014 to 2024), it has saved 0.8% of the fuel import bill. Very tiny fraction, no doubt. But a few caveats – (1) the amount saved would have been low until rollout reached a critical mass; (2) as the ratio of ethanol increases, so the savings would have increased every year; (3) India’s long-term target is 100% ethanol, so in theory, the fraction saved would keep increasing. But still, a valid question that needs to be answered, future projections included.

 

Good follow-ups to the above are like this. (1) The approach would require more of those crops be grown. Which would increase our fertilizer bill (imported and paid in forex). Ensure those additional costs are factored in and evaluate the overall forex savings. (2) All those crops need a lot of water; and we see clear signs of water shortage already. Is that problem factored in, both in terms of monetary costs as well as water shortage for other activities? (3) India, like most countries, subsidizes agriculture for food security. In addition, in India, farmers’ votes count for a lot. How much of agricultural production will end up shifting to ethanol related crops if that becomes more lucrative? What impact would that have on other crop production? (4) Indian agriculture depends on the monsoons. What happens in years where the monsoons are low? Will the impact then be not just on food prices but also fuel prices?

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The second question calls for quantifying the environmental/pollution benefits. As of now, the reduction is just 1% of India’s total CO2 emissions. Very tiny again. But like with the fuel forex listed above, the same counterpoints apply: the reduction will increase as more vehicles move to ethanol; as also as the ratio of ethanol keeps increasing (remember, 100% is the target).

 

A followup point is that, sure, we have enough ethanol production capacity to get to E30 and higher than that. But E100? Can we really produce that much ethanol? If not, what might be a realistic upper limit? What are the calculations on savings (forex, environmental etc) at that upper limit? Is it still worth it?

 

Also being feared is whether more and more forest land will begin to get cleared over time for ethanol related farming. Wouldn’t that cause the negatives to increase in the environmental benefits assessment? Has that been considered?

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Another question is how fast would vehicle internals need to be updated to handle the changing composition of the fuel? Will manufacturers agree to do it, esp. if other countries don’t increase their share of ethanol based fuels simultaneously? Could the whole ethanol idea be forced to come to a grinding halt if vehicle manufacturers don’t work in tandem?

 

A related worry on that front is whether the life of a car will reduce as the fuel mix keeps changing. A car designed for a certain fuel mix may last shorter as the composition of the fuel changes. Would that result in a backlash from vehicle owners, translate to electoral losses, and therefore a change in ethanol policy?

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The future, as always, is impossible to predict. As one of the articles said:

“Ethanol deserves a place in India’s energy strategy… Ethanol is neither a miracle fuel nor a mechanical menace.”

So far, the debate hasn’t gotten politicized too much. There are valid points and questions from both sides. One can only hope the conversation continues to be this way, and the policies adjusted and adapted as needed.