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Government Could Face Setback as Ethanol Production Drops 20 Percent: CRISIL

The Ministry of Consumer Affairs issued a directive on December 7, restricting the use of sugarcane juice and sugar syrup in the production of ethanol supply year (ESY) 2023-24.

December 14, 2023. By Abha Rustagi

The Indian government's ambitious goals of achieving 20 percent ethanol-blended petrol by 2024-25 and 30 percent by 2029-30 face hurdles as CRISIL predicts a 20 percent decline in domestic ethanol production from sugarcane juice in 2023-24.

The Ministry of Consumer Affairs issued a directive on December 7, restricting the use of sugarcane juice and sugar syrup in the production of ethanol supply year (ESY) 2023-24, citing lower sugarcane production due to erratic rainfall.

CRISIL anticipates a 20 percent decrease in domestic ethanol production, potentially lowering the ethanol blending rate to below 10 percent in EY 2023-24. The report notes that while ethanol from cane juice accounts for 25-30 percent of total production, B heavy molasses and C heavy molasses, along with grains, contribute to the rest.

Sugarcane-producing states such as Maharashtra and Karnataka are expected to witness a 9 percent and 3 percent decline in sugarcane and sugar production, respectively, due to insufficient rainfall.

The government's Ethanol Blended Petrol (EBP) Programme aims to reduce import dependence, save foreign exchange, support agriculture, and provide environmental benefits. Public Sector Oil Marketing Companies (OMCs) have already saved significant petrol volumes through ethanol blending.

The new regulations are expected to keep the blending rate below the anticipated 13-15 percent in EY 2023-24, posing challenges to achieving the government's ethanol blending targets. CRISIL's report highlights a 20 percent decrease in ethanol production, coupled with a projected 5 percent increase in petrol consumption.

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Ethanol Blended Petrol