Indian Council for Research on International Economic Relations

Completed Details

Implications of Ethanol Blending Policy in India – Saon Ray, Smita Miglani & Amrita Goldar

Project Leader:  Saon Ray, Smita Miglani and Amrita Goldar
Research Team: 
Commencement:  March 2010
Completion: February 2011
Funded by: Society of Indian Automobile Manufacturers (SIAM), 12 months

The study examines the rationale for the phase-wise implementation of the 5-20 per cent ‘Ethanol Blending Programme’ in India and its cross-sectoral implications on the various stakeholders, including the supplier industry and the industries using ethanol as feedstock. The discussion of issues is based on an analysis of the domestic demand and supply situation of ethanol. In the last two years, the demand from the industrial sector could not be met domestically and was met by imports. The report examines the ethanol blended petroleum pricing mechanism in India in comparison with the globally accepted price mechanism. The report finds that the cost of producing ethanol in India varies largely with molasses prices and hence cyclical variations in sugarcane production chiefly determine the cost of ethanol production. The report analyses the interim price fixation at Rs. 27 per litre by the government by providing estimates of different expenditure heads of ethanol production costs. The results from the analysis show that at higher levels of crude oil prices (such as in 2008 and late 2010 onwards), Oil Marketing Companies (OMCs) would be making a profit with the blending of 5 per cent ethanol with petrol. Changes in crude oil prices would alter this.

Research

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