As we have frequently discussed, India’s Modi government has continued to support cane ethanol manufacturing and fuel use as a tool to increase energy independence, protect currency reserves, and even putatively contribute to environmental targets. As a result of an ethanol blending mandate and accompanying policies, India’s ethanol manufacturing grew by an average of 11 percent per year in the last three seasons.
In 2022/23, domestic cane ethanol manufacturing could rise by some 30 percent YOY. In fact, by January 2023, India had already reportedly reached the 2023 target blend rate of 10 percent. The Modi government had already moved the target blend rate of 20 percent from 2030 five years ahead to 2025 and may instead set a blend target of 25 percent by 2040. Per one official, this would make India the user of a quarter of the world’s fuel ethanol.
To reach an effective blend rate of 20 percent, however, the country would need to triple or more likely quadruple its 2021/22 ethanol manufacturing volume of around 3.51 billion liters, however. To achieve this, the government and private sector will have to deliver on an aggressive expansion and construction to expand manufacturing capacity by some 10 or 11 billion liters.
Part of this expansion could include the use of feedstocks other than sugarcane, though this could bring its own technical, infrastructure, and food security and inflation challenges, of course. Likewise, any government in power would be reticent to significantly increase imports of ethanol. That said, market watchers noted that the Society of Indian Automobile Manufacturers and the U.S. Grains Council signed a memorandum of understanding this January to support “cooperation covering scientific, technical, and policy aspects of the production, blending, distribution, and marketing of ethanol”—a move with a distinct international tenor.
The government also announced the launch of an E20 (gasoline with 20 percent ethanol) pilot program by April 2023. Perhaps more notably, trials are already underway for diesel-ethanol vehicle fuel (15 percent ethanol), per one trade publication.
A quick recap of India’s 2022/23 sugar supply and demand: Through mid-January, production had reached 15.68 MMT of sugar, up about 4 percent YOY and up 14 percent from the five-year average, confirming expectations of a large crop. Output in the key states of Maharashtra, Uttar Pradesh, and Karnataka to date is up 2.3 percent, 1.2 percent, and 2.8 percent YOY, respectively.
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