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  • 20 July, 2021

  • 17 Min Read

Government has encouraged setting up Ethanol plants

The government has encouraged setting up Ethanol plants

  • The entrepreneurs/project proponents are free to set up ethanol plants in any part of the country without seeking any formal approval from the Government of India.

  • However, various statutory clearances from States/ Ministry of Environment Forest and Climate Change (MoEF&CC)/State Pollution Control Boards (SPCBs), etc. are required to be obtained during the course of setting up of the ethanol plant.
  • Besides, DFPD is implementing a scheme for extending interest subvention @ 6% p.a. or 50% of the interest charged by the banks whichever is lower, for 5 years including 1 year moratorium period.
  • The Central Government does not set up ethanol plants on its own in any part of the country. Central Government is however encouraging the setting up Ethanol Plants.

About Ethanol:

  • About 5% of the ethanol produced in the world in 2003 was actually a petroleum product.
  • It is made by the catalytic hydration of ethylene with sulfuric acid as the catalyst.
  • It can also be obtained via ethylene or acetylene, from calcium carbide, coal, oil gas, and other sources.
  • Bio-ethanol is usually obtained from the conversion of carbon-based feedstock. Agricultural feedstocks are considered renewable because they get energy from the sun using photosynthesis, provided that all minerals required for growth (such as nitrogen and phosphorus) are returned to the land.
  • Ethanol can be produced from a variety of feedstocks such as sugar cane, bagasse, miscanthus, sugar beet, sorghum, grain, switchgrass, barley, hemp, kenaf, potatoes, sweet potatoes, cassava, sunflower, fruit, molasses, corn, stover, grain, wheat, straw, cotton, other biomass, as well as many types of cellulose waste and harvesting, whichever has the best well-to-wheel assessment.
  • An alternative process to produce bio-ethanol from algae is being developed by the company Algenol.

National Policy on Biofuels-2018

The National Policy on Biofuels-2018 approved by the Government envisages an indicative target of 20% blending of ethanol in petrol and 5% blending of bio-diesel in diesel by 2030.

National Policy on biofuels- salient features:

  • Categorization: The Policy categorises biofuels as “Basic Biofuels” viz. First Generation (1G) bioethanol & biodiesel and “Advanced Biofuels” – Second Generation (2G) ethanol, Municipal Solid Waste (MSW) to drop-in fuels, Third Generation (3G) biofuels, bio-CNG etc. to enable extension of appropriate financial and fiscal incentives under each category.
  • Scope of raw materials: The Policy expands the scope of raw material for ethanol production by allowing use of Sugarcane Juice, Sugar containing materials like Sugar Beet, Sweet Sorghum, Starch containing materials like Corn, Cassava, Damaged food grains like wheat, broken rice, Rotten Potatoes, unfit for human consumption for ethanol production.
  • Protection to farmers: 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.
  • Viability gap funding: With a thrust on Advanced Biofuels, the Policy indicates a viability gap funding scheme for 2G ethanol Bio refineries of Rs.5000 crore in 6 years in addition to additional tax incentives, higher purchase price as compared to 1G biofuels.
  • Boost to biodiesel production: The Policy encourages setting up of supply chain mechanisms for biodiesel production from non-edible oilseeds, Used Cooking Oil, short gestation crops.

Expected benefits:

  • Import dependency: The policy aims at reducing import dependency.
  • Cleaner environment: By reducing crop burning & conversion of agricultural residues/wastes to biofuels there will be further reduction in Green House Gas emissions.
  • Health benefits: Prolonged reuse of Cooking Oil for preparing food, particularly in deep-frying is a potential health hazard and can lead to many diseases. Used Cooking Oil is a potential feedstock for biodiesel and its use for making biodiesel will prevent diversion of used cooking oil in the food industry.
  • Employment Generation: One 100klpd 2G bio refinery can contribute 1200 jobs in Plant Operations, Village Level Entrepreneurs and Supply Chain Management.
  • Additional Income to Farmers: By adopting 2G technologies, agricultural residues/waste which otherwise are burnt by the farmers can be converted to ethanol and can fetch a price for these waste if a market is developed for the same.

Significance of Biofuels:

  • Globally, biofuels have caught the attention in last decade and it is imperative to keep up with the pace of developments in the field of biofuels.
  • Biofuels in India are of strategic importance as it augers well with the ongoing initiatives of the Government such as Make in India, Swachh Bharat Abhiyan, Skill Development and offers great opportunity to integrate with the ambitious targets of doubling of Farmers Income, Import Reduction, Employment Generation, Waste to Wealth Creation.

Classification of Biofuels:

  • 1st generation biofuels are also called conventional biofuels. They are made from things like sugar, starch, or vegetable oil. Note that these are all food products. Any biofuel made from a feedstock that can also be consumed as a human food is considered a first generation biofuel.
  • 2nd generation biofuels are produced from sustainable feedstock. The sustainability of a feedstock is defined by its availability, its impact on greenhouse gas emissions, its impact on land use, and by its potential to threaten the food supply. No second generation biofuel is also a food crop, though certain food products can become second generation fuels when they are no longer useful for consumption. Second generation biofuels are often called “advanced biofuels.”
  • 3rd generation biofuels are biofuel derived from algae. These biofuels are given their own separate class because of their unique production mechanism and their potential to mitigate most of the drawbacks of 1st and 2nd generation biofuels.

Major Types of Biofuels


  • It is derived from corn and sugarcane using fermentation process.
  • A litre of ethanol contains approximately two thirds of the energy provided by a litre of petrol.
  • When mixed with petrol, it improves the combustion performance and lowers the emissions of carbon monoxide and sulphur oxide.


  • It is derived from vegetable oils like soybean oil or palm oil, vegetable waste oils, and animal fats by a biochemical process called “Transesterification.”
  • It produces very less or no amount of harmful gases as compared to diesel.
  • It can be used as an alternative for the conventional diesel fuel.


  • It is produced by anaerobic decomposition of organic matter like sewage from animals and humans.
  • Major proportion of biogas is methane and carbon dioxide, though it also has small proportions of hydrogen sulfide, hydrogen, carbon monoxide and siloxanes.
  • It is commonly used for heating, electricity and for automobiles.


  • It is produced in the same way as bioethanol i.e.through the fermentation of starch.
  • The energy content in butanol is the highest among the other gasoline alternatives. It can be added to diesel to reduce emissions.
  • It serves as a solvent in textile industry and is also used as a base in perfumes.


  • Biohydrogen, like biogas, can be produced using a number of processes such as pyrolysis, gasification or biological fermentation.
  • It can be the perfect alternative for fossil fuel.

Ethanol Blending Policy

  • With the vision to boost agricultural economy, to reduce dependence on imported fossil fuel, to save foreign exchange on account of crude oil import bill & to reduce the air pollution, Government has fixed target of 10% blending of fuel grade ethanol with petrol by 2022 & 20% blending by 2025.
  • With a view to support sugar sector and in the interest of sugarcane farmers, the Government has also allowed production of ethanol from B-Heavy Molasses, sugarcane juice, sugar syrup and sugar; and encouraging sugar mills to divert excess sugarcane to ethanol.
  • In previous sugar season 2019-20 about 9 LMT of sugar was diverted to ethanol. In current sugar season 2020-21, it is likely that more than 20 LMT of excess sugar would be diverted to ethanol.
  • By 2025, it is targeted to divert 50-60 LMT of excess sugar to ethanol, which would solve the problem of high inventories of sugar, improve liquidity of mills thereby help in timely payment of cane dues of farmers. In past 3 sugar seasons about Rs. 22,000 cr revenue was generated by sugar mills/ distilleries from sale of ethanol to OMCs.
  • To increase production of fuel grade ethanol and to achieve blending targets, the Govt of India has allowed use of maize and rice with FCI for production of ethanol.
  • Government has declared that rice available with FCI would continue to be made available to distilleries in coming years.
  • The extra consumption of surplus food grains would ultimately benefit the farmers as they will get better price for their produce and assured buyers; and thus will also increase the income of crores of farmers across the country.
  • Government has fixed price of ethanol from maize as Rs 51.55/litre & rice available with FCI as Rs 56.87/litre for ethanol supply year 2020-21. For FY 2020-21, Government has fixed the price of FCI rice to Rs 2000/quintal for production of ethanol.
  • For FY 2021-22, Government has decided to continue the price of FCI rice to Rs 2000/quintal for production of ethanol.
  • This will give confidence to industry about the stability in raw material price and its availability. For the purpose of supply of surplus rice for the production of ethanol, distilleries are at liberty to choose the nearest FCI depot as per requirement/logistics.
  • In current ethanol supply year (ESY) 2020-21 (December to November) to achieve 8.5% blending target, about 325 Cr ltrs ethanol is required to be supplied to OMCs.
  • As on 26.04.2021, about 349 cr ltrs ethanol have been allocated by OMCs to sugar mills/ distilleries, out of which contracts of about 302 cr ltrs have been signed by distilleries &124 cr ltrs have been supplied. Efforts are being made by DFPD &MoPNG / OMCs to ensure achievement of blending target. Also, in next ESY 2021-22, it is likely to supply more than 400 cr ltrs of ethanol to OMCs to achieve 10 % blending.
  • With a view to increase existing capacities further, DFPD has notified modified interest subvention scheme on 14.01.2021 for setting up new grain-based distilleries/ expansion of existing grain-based distilleries, dual feed distilleries & molasses-based distilleries to produce ethanol & production of ethanol from other 1G feed stocks. 422 proposals with a capacity of 1684 cr ltrs for a loan amount Rs. 42000 crore have been approved by DFPD. It is expected that from the proposals approved, more than 600 cr ltrs may come up in next 2 to 4 years. Thus, the ethanol distillation capacity from these projects and ongoing projects may reach to 1500 cr ltrs by 2024-25 which would be sufficient to achieve 20% blending target.
  • Sugarcane and ethanol is produced mainly in three states viz Uttar Pradesh, Maharashtra and Karnataka. Transporting ethanol to far flung States from these three states involves huge transportation cost.
  • By bringing new grain based distilleries in the entire country would result in distributed production of ethanol and would save a lot of transportation cost and thus prevent delays in meeting the blending target & would benefit the farmers across the country.
  • For production of ethanol, there is sufficient availability of feed stocks; & Govt. has also fixed remunerative prices of ethanol derived from various feed stocks. Moreover, OMCs being the assured buyer for ethanol has given comfort for purchase of ethanol from distilleries for next 10-15 years.
  • Hence, these ethanol projects are viable. Ministry of Environment, Forest & Climate Change has also streamlined the process of getting environment clearance (EC) for ethanol projects. Department of Financial Services and State Bank of India have also issued Standard Operating Procedure (SOP) for sanctioning and disbursal of loans for ethanol projects which would expedite sanctioning and disbursal of loans.
  • Production of ethanol would not only facilitate diversion of excess sugar to ethanol but would also encourage farmers to diversify their crops to cultivate particularly maize/corn which needs lesser water.
  • It would enhance production of ethanol from various feed stocks thereby, facilitate in achieving blending targets of ethanol with petrol and would reduce import dependency on crude oil, thereby, realizing the goal of Atmanirbhar Bharat.
  • It will also enhance income of farmers as setting up of new distilleries would not only increase demand of their crops but would assure farmers of getting better price for their crops.

Critical Analysis of Ethanol Blending

  • E-100 pilot projects has been launched at Pune city by Public Sector Oil Marketing Companies (OMCs) on June 05, 2021.
  • With a view to enhance fuel choice and facilitate sale of E-100 fuel, MoP&NG vide its order dated March 22, 2021 has amended the Motor Spirit and High Speed Diesel (Regulation of Supply, Distribution and Prevention of Malpractices) Order, 2005 by permitting the direct sale of Bio-ethanol (E100) by an oil company for use as standalone fuel or blending with motor spirit, for compatible automobiles to all consumers, in accordance with the standards specified by the Bureau of Indian Standards.
  • The Notified National Policy on Biofuels – 2018, provided an indicative target of blending 20% ethanol in petrol by 2030.
  • Government has undertaken several supply and demand side interventions since 2014 which has enabled improvement in ethanol blending from average 1.53% during Ethanol Supply Year (ESY) 2013-14 to 7.93% during ongoing ESY 2020-21 as on July 12, 2021.
  • An Interdepartmental Expert Committee under the Chairmanship of Additional Secretary NITI Aayog has submitted a “Roadmap for Ethanol Blending in India 2020-25” which outlines the journey for 20% ethanol blending in the country.
  • Ministry of Petroleum and Natural Gas has published a Notification dated June 02, 2021, wherein, it has been stated that OMCs shall sell ethanol blended petrol with percentage of ethanol upto 20% as per BIS Specifications in the whole of India and Union Territories and shall come into effect from April 01, 2023.

Source: PIB

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