13/01/2025
The Indian government’s recent push for ethanol-diesel blending and green hydrogen production marks a transformative step toward sustainability, energy security, and economic diversification. As India continues its efforts to reduce dependence on fossil fuels and promote renewable energy, the sugar industry has been identified as a key stakeholder in this transition. With a 13.9% ethanol blending rate achieved during the ethanol year 2023-24, the country is making significant progress in its Ethanol Blending Program (EBP), which mandates the blending of ethanol with petrol to reduce carbon emissions. This initiative has the dual benefit of enhancing energy security while supporting the agricultural sector by creating additional demand for sugarcane. Positioned as the third-largest ethanol producer globally, behind only the USA and Brazil, India is uniquely poised to capitalize on its agricultural output to further accelerate ethanol production. With sugar consumption at 290 lakh metric tons (MT) against a production of 330 lakh MT, the country has surplus capacity that can be diverted toward ethanol production, reducing its reliance on sugar exports and mitigating risks associated with fluctuating global sugar prices.
The sugar industry, with its vast infrastructure and expertise in sugar and ethanol production, can play a pivotal role in this energy transition. By producing ethanol from sugarcane juice, B-heavy molasses, and other byproducts, the industry can not only contribute to achieving the government’s ambitious 20% ethanol blending target by 2025 but also diversify its revenue streams. Additionally, the industry is well-positioned to explore opportunities in green hydrogen production, a clean and sustainable energy source that aligns with India’s renewable energy goals. Producing green hydrogen from renewable feedstocks such as biomass can help the industry move beyond its traditional dependence on sugar production, ensuring long-term profitability and environmental sustainability. The government has also highlighted the potential for ethanol exports to neighboring countries like Bangladesh, Bhutan, Nepal, and Sri Lanka, presenting a lucrative avenue for the sugar industry to expand its market presence and reduce its reliance on domestic consumption alone.
Despite these opportunities, the industry faces challenges that need to be addressed for a successful transition. Scaling up ethanol production will require significant investment in production capacity, infrastructure, and storage facilities. Balancing sugar production and ethanol output is critical to avoiding imbalances in supply and demand, which could impact profitability. Infrastructure development for flex-fuel vehicles and CNG pumps will also be essential to support the adoption of alternative fuels. Automakers such as Tata Motors, Suzuki, and Toyota are preparing to launch flex-fuel vehicles, but widespread adoption will depend on consumer awareness, affordability, and the availability of supporting infrastructure. Similarly, promoting alternative fuel-based tractors will require incentives and technological support to drive adoption among rural users. Policy support remains vital, with the government offering subsidies on loans for ethanol plants, capital subsidies, excise duty exemptions, and reduced VAT rates on ethanol production. Continued and expanded policy measures will be crucial to maintaining momentum.
The benefits of this shift are significant. Ethanol blending and green hydrogen production can substantially reduce India’s carbon emissions, contributing to global climate goals while improving the country’s energy self-reliance. The initiatives also present an opportunity to boost rural economies by increasing demand for sugarcane and providing farmers with stable incomes. By diversifying into value-added products like ethanol and green hydrogen, the sugar industry can reduce its dependence on sugar production alone and mitigate risks associated with volatile sugar prices. In the long term, India’s leadership in renewable energy and bio-energy could position it as a global leader in sustainable fuels, with the potential to export ethanol and green hydrogen to international markets.
Looking ahead, success will depend on fostering public-private partnerships, scaling up production capacity, and leveraging technological advancements. Expanding ethanol production from non-food feedstocks such as grains and biomass can help reduce pressure on sugarcane while meeting the rising demand for alternative fuels. Developing robust export channels and strengthening logistics will be essential to capitalizing on global market opportunities. The government’s strategic focus on ethanol and green hydrogen production not only aligns with its vision of a sustainable future but also provides the sugar industry with a transformative opportunity to diversify and thrive in a rapidly evolving energy landscape.