The policy has expanded the scope of raw materials that can be used for producing ethanol, including sugarcane juice, sugar beet, sweet sorghum, corn, cassava, damaged food grains like wheat, broken rice, and rotten potatoes unfit for human consumption. Currently, ethanol is mainly produced from molasses. Food grains can now be used for producing ethanol during surplus production years, according to the national policy on biofuels that was approved by the Cabinet.
Food for fuel has often been a controversial policy matter across the globe as many believe using grains for ethanol raises food inflation risk. By limiting use of grains for fuel production only in surplus production years, the government has tried to limit the risk.
"With a thrust on advanced biofuels, the policy indicates a viability gap funding scheme for 2G ethanol bio-refineries of Rs 5,000 Crore in 6 years in addition to additional tax incentives, higher purchase price as compared to 1G biofuels," the statement elaborated. The policy has also encouraged setting up of supply chain mechanisms for bio-diesel production from non-edible oilseeds, used cooking oil, and short gestation crops.
The ethanol supply year 2017-18 is likely to see a supply of around 150 crore litres of ethanol which will result in savings of over Rs 4,000 Crore of forex and help ?cut carbon dioxide emission by 30 lakh tonne, the statement said.
India has for years trailed the official target of blending 5 percent ethanol and biodiesel in petrol and diesel respectively to cut pricey oil import and save foreign exchange. The current blending ratio is about 2 percent for petrol and less than 0.5% for diesel.
India imports 83 percent of its domestic crude oil requirement.
At present state oil companies are in the process of setting up twelve 2G bio refineries with an investment of around Rs 10,000 crore.
“Farmers are at a risk of not getting appropriate price for their produce during the surplus production phase. Taking this into account, the Policy allows use of surplus food grains for production of ethanol for blending with petrol with the approval of National Biofuel Coordination Committee,” According to an official statement.
