India is pushing for ethanol-fuelled cars to help slash the import bill while also reduce air pollution. But first, it has to overcome supply and cost challenges.
Flex-fuel engines will be significantly different, CV Raman, chief technology officer and senior executive director of engineering at Maruti Suzuki India Ltd., told BloombergQuint. “We have to make powertrains (set of components that create power and deliver it to wheels) fully compliant to this. Ethanol has a corrosive nature, and acts as a solvent and hence parts need to be designed to make the engine reliable."
Managing 20% to 85% ethanol blend with petrol will mean having a control system that can sense, adjust and adapt to it, he said. That's why India's largest carmaker expects the flex-fuel variants to “take time” and increase cost by up to Rs 30,000 per unit.
Earlier this month, Nitin Gadkari, the Minister for Road, Transport and Highway, appealed to automakers to make flex-fuel vehicle with ethanol blend of up to 85%. Last year, the government notified that E20 fuel–80% petrol blended with 20% ethanol–will be available throughout the country from April 1, 2025. That's five years ahead of the previous target.
That underscores the urgency to lower consumption of fossil fuels by the world's third biggest oil importer that relies on overseas suppliers to meet 80% of demand. Ethanol–made from grains and sugar– is one of the proposed ways to cut crude imports, reduce carbon emissions, and boost income of farmers. The government is offering financial assistance and faster environment clearances to biofuel producers.
The transition is not expected to require as much investment as the shift from Bharat Stage IV to VI engines, though India will be the first country to implement the change on a BS6 engine, said Raman.
India can take lessons from Brazil where ethanol blending is mandatory at 27% and flex-fuel vehicles make up 87% of total car sales, according to a Systematix Research report dated Feb. 21. The brokerage expects India to have a fleet of E12-15 compliant, E20 compliant, and flex-fuel vehicles by 2025.
BloombergQuint spoke with experts to gauge the challenges to E20 implementation:
Availability
At present, the blending is at 9.5%, even though vehicles are mandated to be E10 compliant– a blend of 10% ethanol and 90% petrol.
Consistent availability of ethanol across India is crucial to achieve E20 blending by 2025, said Raman.
It's a challenge given that 80% of the sugarcane and molasses-based ethanol is produced in just three states of Uttar Pradesh, Maharashtra and Karnataka.
A worker at a sugar mills distillery which produces ethanol, in India. (Photographer: Amit Bhargava/Bloomberg)
To meet the 2025 target, ethanol production needs to increase to 1,000 crore litres from the current 400 crore litres. It will be “challenging” to achieve this milestone, and only 17-18% blending seems achievable by 2025, according to the Systematix Research report.
“However, we are confident that by CY26, 20% blending will be achieved, for which 960 crore litres of ethanol will be required,” the report said.
Seeing the potential and demand for ethanol, 213 new projects were announced between September 2020 and January 2021, while 16 new projects have been proposed in January 2022. The ethanol supply will be from 15 states across the country.
The industry is creating capacity at desired speed to meet the timeline for 20% blending, said Shishir Joshipura, managing director and chief executive at Praj Industries Ltd., which sets up ethanol plants.
“With the expansion of feedstock basket (to include grains apart from sugarcane) under the new policy, every state can be an ethanol producer," he said. "We are currently constructing 90+ plants in the country, on the back of strong demand that has come in the last 18 months."
Joshipura expects to the industry to create a total of capacity of 1,000 crore litres a year by 2025 in line with the 20% ethanol blending target.
Fuel Availability: From E10 To E20
While the industry prepares itself for E20 followed by other flex fuels, there is uncertainty about existing vehicles that are compliant for E10 or E0 –100% petrol vehicles.
Another concern is that increasing the fuel blend could lead to deterioration of vehicle's fuel hoses. For that, there will be a need to check the impact of E20 fuel on E10-compliant vehicles, said Maruti Suzuki's Raman.
An alternative is through parallel dispensing of E10 fuel till the end of life of the current vehicle population, Hemal Thakkar, director at Crisil Ltd., told BloombergQuint. “(It is) similar to what happens in Brazil where customers can choose from different blends of ethanol or flex fuel.”
But that would require augmenting the entire supply chain and logistics of oil marketing companies to store, handle, and dispense E20 blends. “OMCs will have to deal with potential constrained inter-state movement of ethanol,” the Systematix Report said, explaining the logistical hurdles. “They will have to continue to provide E10 blends at the fuel pumps, necessitating separate storage and dispensing systems for E10 and E20.”
Cost Efficiency
Even if supply and availability are sorted, there are other trade-offs. The fuel efficiency drops 3-4% on E10, and 4-5% on E15, according to the U.S. Department of Energy.
And due to ethanol's lower energy content, flex fuel vehicles operating on E85 get roughly 15% to 27% fewer miles per gallon than when operating on regular gasoline, according to a note by the U.S. Department of energy.
Which means, the fuel should be priced right to make it viable for customers to opt for it, Thakkar said.
Clarity On Policy
A clear road map for ethanol blending is needed, especially at a time when the industry is dabbling with multiple technologies– CNG, electric, ethanol and other alternative fuel options.
While the government's intent is to reduce pollution and dependence on crude, Thakkar said there must be a long-term policy road map for the industry, with all the stakeholders linked to it and not a knee-jerk reaction.
RC Bhargava, chairman at Maruti Suzuki, pitched for incentives for cleaner mobility other than electric vehicles.
India needs to offer clarity on incentives for ethanol-blending and using biogas and CNG as auto fuels as costly electric vehicles won't be enough to drive adoption of cleaner mobility, he said.
“Electric vehicles are just one part of the multiple technologies we will need to reduce dependence on oil imports and slash carbon emissions,” he said. “If we have to achieve these targets in the near term, just EVs aren't enough,”
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