Ethanol as Fuel
Government has set an ambitious target of 20% ethanol blending
in petrol by 2025. This is a significant move to cut down the crude import
which contribute to 25% of total import in terms of value in India. As of June
this year, the national average for ethanol blending was 13%, an increase from
previous year of 12.1% in 2022-23 and 10% in 2021-22. The blending ratios is
reaching to nearly 16% by June 2024.
What is important to understand that ethanol production in
India initially relied predominantly molasses, a by-product of sugar production.
The policy shift to include grains as supplementary feedstocks, such as maize
and damaged rice, further diversifying the sources of ethanol has very prefound
effect on raw material utilization for ethanol production.
With government incentivise by setting a higher ex-distillery price of Rs 71.86 per liter for ethanol produced from maize, has led to the establishment of multi-feedstock distilleries, which operate on a mix of molasses, juice/syrup, and grains, depending on the season as increased.
Impact on Maize Prices
This has resulted in more of maize being used for production
of ethanol which has led to a significant increase in prices of maize rising
from ₹2,160 to ₹2,600 per quintal this year. This price surge can be attributed
to heightened demand in the market. Such a substantial rise underscores the
importance of maize as a staple crop and the increasing pressures from both
domestic consumption, mainly poultry and industrial use.
The MSP for maize has been adjusted from ₹1,310 in the
2014-15 agricultural year to ₹2,300 for the 2024-25 period. This 75.6% increase
over the decade highlights the government's commitment to ensuring fair
compensation for farmers amidst fluctuating market conditions.
Implications for Farmers
Shift of more maize
being used for ethanol is a boon for maize farmers, particularly in key growing
states like Karnataka, Madhya Pradesh, Maharashtra, and Bihar. However, the
transition has sparked concern among other sectors. The All India Poultry
Breeders Association and Compound Livestock Feed Manufacturers Association have
raised alarms over potential maize shortages. With domestic production
estimated at 36 million tonnes against a requirement of 41 million tonnes,
including ethanol needs, there are worries about adequate supply for both
livestock feed and fuel.
Looking Ahead
The diversification of ethanol feedstocks reflects a
strategic move towards more sustainable and economically viable energy
solutions. While the transition to using cereal grains has provided significant
benefits, it also highlights the need for balanced resource management to avoid
potential shortages and ensure that all sectors relying on maize are adequately
supported.
As India continues to push for greater ethanol blending and
enhances its energy security, the success of this shift will depend on the
effective management of feedstock resources and the ability to address emerging
challenges in agricultural and energy policy.
Market Outlook
The growing demand for ethanol has led to an increase in the net sowing area for maize. This increase is further propelled by the government's focus on grain-based ethanol, aligning with broader goals of energy security and reducing dependence on fossil fuels. However, the soaring maize prices pose challenges for ethanol production targets, potentially leading to economic and supply chain disruptions.
Maize prices in the Delhi market on July 31, 2022, were only
around 2200-2250 INR per quintal. However in 2024, prices surged to 2550-2600
INR per quintal. A decade ago, prices were between 1800-2000 INR. In southern
Indian markets like Karnataka and Tamil Nadu, prices have already crossed 2700
INR per quintal.
Maize prices have reached unprecedented levels primarily due
to the added demand for ethanol production. Despite record production and reported
import from Myanmar, the rising prices are a significant concern. With Indian
government pushing to meet a 20% ethanol blending target in petrol by 2025 is
adding fuel to the fire.
Currently, maize prices show a bullish trend, with an
expected average of 2500-2550 INR per quintal until the Kharif maize harvest,
which is at least three months away. We expect market continue to be firm. Reports
of fall army worm infestation in some growing area of maize is also a factor.
Factors Contributing to Price Increase:
Increased Ethanol Demand: Heightened demand for ethanol
production due to government policies.
Production and Imports: Despite record production and
imports, demand outstrips supply.
Government Policies: Ban on sugarcane ethanol production and
promotion of grain-based ethanol.
Feed and Other Uses: Traditionally used in poultry and
cattle feed, now diverted to ethanol production.
Fall Army worm infestation in current maize crop.
We (BKC Aggregators) through our app Fasal Salah provides
daily advisories for farmers, including updates on mandi prices. For example,
Fasal Salah is assisting farmers in cultivating more maize as an alternative to
the traditionally water-guzzling paddy. It helps farmers make informed
decisions, in optimizing their crop choices and resource use.
Such reports are available on our Fasal Salah App.
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Very informative article on Maize, keep sending such articles and also market updates.
ReplyDeleteVery informative. Why is the Govt not supporting the Ethanol producers by allowing import of maize till the production in India reaches a level required for 20% Ethanol blending and other industries' e.g. poultry feed's maize requirements. Govt has already increased the maize MSP, so the farmers interest are safeguarded, what about the interest of the Ethanol producers who have invested hundreds of crores to support Govt's EBP program?
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