Green Energy

Sugarcane can help India achieve 20% ethanol blending by 2025: CRISIL

CRISIL Ratings has come out with a new report and has hinted that India needs to expedite its efforts if it wants to achieve its desired ethanol blending targets. India’s target of blending 20% ethanol in petrol by the Ethanol Supply Year (ESY) 2025, which translates to about 990 crore liters per year, will require efficient utilization of both grain and sugarcane feedstock to boost supply, says CRISIL.

CRISIL says that this strategy could also help manage sugar inventory, particularly with the high carry-over stock anticipated at the end of the current season due to government restrictions on ethanol production and exports.

The report projects a significant increase in annual ethanol production from grains, expected to rise to around 600 crore liters by the next season, compared to an estimated 380 crore liters this season. The remaining requirement will need to be met by producing ethanol from sugarcane, which is feasible given the substantial existing capacity.

In the report, CRISIL analyzed 17 integrated sugar mills, which contribute to about one-third of sugar-based ethanol supply. Blending ethanol helps reduce India’s dependence on crude oil imports, with the blending rate having steadily increased by 200-300 basis points each season since ESY 2021. While grain-based ethanol production is not regulated, the government controls the amount of sugarcane used for ethanol based on its assessment of the sugar demand-supply balance.

The report also mentions that this year, sugarcane production is expected to be affected by last year’s erratic rainfall, leading to a restriction in ethanol production from sugarcane to around 250 crore liters (equivalent to 2.5 million tonnes of sugar) this season.

CRISIL, Director, Poonam Upadhyay, “Ethanol blending could still reach 14% in ESY 2024 due to a significant 40% capacity expansion in grain-based ethanol production, which will offset the reduced output from sugarcane. However, achieving the 20% blending target by ESY 2025 may require allocating sugarcane sufficient to produce ~4 million tonnes of sugar for ethanol, similar to what was done in the 2023 season.”

Looking ahead, CRISIL highlighted that the policy on the quantum of sugarcane allowed next season, as well as the availability and prices of grain-based feedstock, will be key factors to watch.

Subhash Yadav

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