Tag Archives: trade

Marrying ethanol with petrol the need of the hour

In an interview with Ambrosia, V.N. Raina, Director General, AIDA, stresses on the need to blend 10% of ethanol with Petrol to save valuable foreign exchange for the country.

What is the current situation of ethanol production in India?

The production of ethanol for mixing with petrol was introduced in the country during the year 2006-07. Ethanol is an important bio-fuel and is blended with petrol under EBP programme. It is an important component of national bio fuels programme. Ethanol is a source of energy which is indigenous, non polluting and virtually inexhaustible.Therefore to promote this bio fuel, the govt. has scaled up the blending targets which are given below:-

Production of Surplus grains declared (2018-19)

S.No.               Products Qty                 ( Lac Tonnes)

1                        Maize                            30-40

2                        Bajra                             9.00

3                       Jawar                             4.70

The initial aim was to mix 5% ethanol with petrol by the season 2016-17. However, to promote bio fuel the govt. scaled up the blending targets from 5% to 10% to be achieved by the season 2021-22 under Ethanol Blended with Petrol Programme (EBP). However, due to various reasons implementation of this programme was not seriously taken up till the year 2017 when the govt. notified the programme. But with all the efforts of the govt. and the distillery industry producing ethanol from molasses 5% blending could not be achieved even till the year 2016-17, However, during the current year 2018-19 (closing 30th Nov. 2018) total blending of approx. 6.2% has already been achieved. This also included the ethanol produced from grains “not fit for human consumption” to supplement the ethanol supplies.

The entire ethanol game plan envisaged by the govt. Can be explained in nutshell as below:

Centre has set a target of 10% ethanol blending by petrol by 2022, leading to forex savings of `12,000 crores a year.

There was 3.5% blending in 2016-17 sugar season and 4.0% in 2015-16.

Nationwide average for ethanol blending stood at 4.02% as on Oct.1

The latest proposal will allow ethanol production from surplus quantities of maize, jawar and bajra, as well as other feedstock such as fruit and vegetable wastes.

Ethanol blending in petrol has risen from 38 crore litres in supply year 2013-14 to an estimated 146 crore litres in 2017-18.

What are the incentives being given by the government to ramp up the production given the increasing ethanol requirements in India?

The Govt. first introduced financial assistance scheme by extending financial assistance through spot loans to sugar mill attached distilleries to set up plant and machinery for production and enhancement of ethanol production capacities in the country. Many distilleries attached to sugar mills applied for and received the financial assistance form the Ministry of Consumer Affairs, Food & Distribution, GOI enabling them to put up distilleries and ethanol production equipment. The financial scheme included facility of interest subvention @ 6% per annum or 50% of rate of interest charged by banks, whichever is lower with certain conditions.

In order to augment ethanol production capacity and thereby also allow diversion of sugar for production of ethanol, in principal approval has been granted for extension of soft loan of `6139 crores though banks to the mills for setting up new distilleries /expansion of existing distilleries and installation of incineration boilers or installation of any method as approved by Central Pollution Control Board for Zero Liquid Discharge for which Government will bear interest subvention of `1332 crore. About 114 sugar mills are likely to be benefitted as a result of this measure and ethanol production capacity of sugar mills in the country is likely to be enhanced by about 200 crore litres per annum in the coming three years.

The Govt. has notified a new scheme on 08.03.2019 for extending financial assistance to sugar mills for enhancement and augmentation of ethanol production capacity. Under the scheme Govt. would bear `2,790 core towards interest subvention for extending indicative loan amount of `12,900 crore by banks to the sugar mills for augmentation of ethanol producing capacity.

The Govt. has notified a scheme on 08.03.2019 for extending financial assistance to molasses based stand-alone distilleries. Under the scheme, Govt. would bear `565 cores towards interest subvention for extending indicative loan amount of `2600 crore by banks to the molasses based stand-alone distilleries to augment their ethanol production capacity.

On further request from distillery industry and All India Distillers’ Association (AIDA), govt. has also agreed to consider financial assistance on the same condition to grain based distilleries for producing ethanol. Many distilleries have already applied. In the meantime loans have been sanctioned as far as molasses based distilleries are concerned. The scheme for loans to grain based distilleries is also under consideration of the govt. This step will provide further possible resources towards increasing the production of ethanol under EBP Programme.

What are the current requirements of ethanol and are there any deficit and how are they bridging it?

The current requirement as per the programme of introducing 10% blending by the year 2022 requires approximately 300 crore ltrs. of ethanol. The govt. has announced various incentives and financial assistance to the industry. It is hoped by the closing of the year 2019-20 when new distilleries would have gone up including increase in existing production capacities in the existing units due to the positive steps taken by the govt., the 10% blending will be achieved by the year 2020- 21/22.

The prices announced for Ethanol for supply year 2019-20 (1st Dec. 2019 – 30 Nov. 2020) are:

S.No.                            Products                                              Price (Rs.) / BL

1                                   “C” Heavy Molasses                            43.75

2                                   “B” Heavy Molasses                            54.27

3                                   Sugarcane Juice                                   59.48 + GST & Transportation charges

The revision of prices of ethanol supplied from grains is also under consideration by the govt. in consultation with the distillery industry

In addition the govt. has also taken steps in consultation with the industry to set up and revise the prices of ethanol from time to time so that the industry feels protected about the production and supply of ethanol. A very recent price increase has been introduced by the govt. 01.01.2019, which now will bring the price of ethanol from various sources to the level given below w.e.f. 01/12/2019.

The revision of prices of ethanol supplied from grains is also under consideration by the govt. in consultation with the distillery industry.

The govt. of India very rightly announced use of surplus grains in addition to the spoilt and damaged grains for production of ethanol. The govt. has declared following surplus grains under this policy which could be used for production of ethanol for the year 2018-19. It will be further increased and announced from time to time by the govt. in consultation with the concerned departments. The present quantities of availability of surplus grains in the country which could be used by distilleries for production of ethanol are as below:

Will the petroleum companies be able to absorb the new price increase?

The setting up of prices are being announced by the govt. of India in consultation with the petroleum companies and it has been agreed that the prices have to be revised from time to time if the need be, to ensure continuous supply of ethanol and to increase its production as much as possible. The petroleum companies are part of the final prices of ethanol, calculated and announced by the govt.

What is the current requirements of ENA in the liquor industry ? Is there sufficient production to meet the needs of the industry?

Current requirement of ethanol as well as ENA depends upon the production and availability of raw materials for the basic production of Rectified Spirit (R.S)from which ENA and / or ethanol is produced. As per the present scenario the supply of ENA for liquors is being carried out by the industry alongwith supplies of ethanol. However, the market now competitive and has to be kept in mind for prices of liquor which are controlled by the state govts. Considering the market price of the ENA vis-a-vis that of Ethanol, it should be fair to the liquor industry as well.

A good quantity of grain spirit being produced is also in the market now and there sufficient quantity is available both for ENA and Ethanol as per the programme set up by the govt. However, it vastly depends upon competitive pricing and balanced affordability.

What incentives is the government giving for ENA production, both for domestic consumption as well as for exports?

The procurement and supply of ENA for potable purposes comes under the ambit of state govts. and the state govts. have to ensure good prices for IMFL for continuous availability of ENA in the competitive market of alcohol production in the field. The Central Govt. has no role for fixation or revising liquor rates and prices in the market, which is under the govts. of respective states.

What are the alternative feedstocks government is looking at for ethanol production besides traditional molasses and grain? And what are the challenges we have for the same?

The govt. of India has been on the look out for many alternatives, sources and resources for finding out alternative feed stocks for production of Ethanol. The govt. has already considered all feed stocks which are possibly available like agricultural wastes, forest wastes, bagasse, bamboo miscellaneous millets etc. and the research in this regard is continuously being undertaken for selecting and finalising the new feed stocks for production of ethanol.

There is an option under the research programme which will continue for searching out various resources of feed stocks and resources from all fields will be studied provided they are reasonably affordable and competitive with other feedstocks.

Will electric vehicles disrupt the demand for petrol and as a result the demand for ethanol?

No, in the near foreseeable future there is no possible disruption of demand for petrol or ethanol as a result of introducing electric vehicle in the country. The demand for petrol is rather expected to increase rapidly as the number of motor vehicles on the road is increasing by the day.

Illicit alcohol trade gives hangover to the nation

Mr. Nakul Pasricha, President Authentication Solution Providers Association gives insights on the cons of the spurious liquor industry.

What is the impact of spurious liquor industry for the government, people and the IMFL industry?

Illicit trade in alcohol undermines sustainable economic growth. Collectively, it affects all the stake holders in society in various terms. While the industry and Government lose revenue, it is the consumer who is impacted the most as illicit trade in liquor poses a serious threat to consumer health. Poor quality or spurious liquor can cause death and serious illness, as seen in connection with several incidents of hooch tragedy in India. According to various media reports more than 150 persons died in India due to hooch tragedies in year 2019.

Excise Duty which is an important source of revenue is continually under threat from the practise of illicit trade. Considerable amount of money which could be used to benefit the government services of a country are being diverted to the pockets of criminals participating in illegal trading. However, more than loss of tax revenue, it could costs Government loss of image/goodwill. The hooch tragedies occur due to illicit liquor consumption eroded the image of state governments which create challenge for state government to ensure consumer confidence.

How can the government streamline the industry to benefit the poorer section of society to get affordable liquor at a price which will deter rampant drinking and the alcobev industry should not be labeled as a sin industry?

There is a direct link between prices and consumption. Post hooch tragedy in Uttar Pradesh, the Department set up a committee, which found that poorer section are using smuggled liquor, as it was available at almost half of the price of Government Country Liquor bottles. This will continue to be an area where careful thought is needed in order to preserve a balance.

What are the challenges of fighting the illicit liquor trade? How can the FSSAI regulate the quality of liquor sold?

Illicit alcohol is prevalent in both developed and developing countries, with no country immune to this threat. For example, the UK government lost £1.3 billion in excise tax revenue in the period 2015-16, and Dutch authorities estimate the annual revenue losses from illicit trade in alcohol at €100 million. Liquor bootlegging in New York City alone is estimated to have cost the city US$1 billion in lost taxes over the past 15 years. The illicit alcohol products are sold as either counterfeits of genuine brands or are unlabelled (Source: TRACEIT.ORG). When producing counterfeits, the forgery goes beyond the product’s label, often including bottle designs and caps.

In India, State Excise Department faces various challenges such as

a) How to combat smuggling and illicit liquor
b) How to ensure fool proof labeling and supply chain? How to ensure consumer confidence
c) How to increase excise revenue and the most important the problem of identification / authentication – How to differentiate fake liquor bottles from genuine?

The Food Safety and Standards Authority of India (FSSAI) had last year issued a regulation on alcoholic beverages and the same became effective from April 1. As per this regulation, all liquor bottles need to carry a statutory warning that “consumption of alcohol is injurious to health. Be safe-don’t drink and drive”. So far, it was primarily regulated by excise commissioners and they were only looking at alcoholic content and the toxic substances in alcohol. Now, there are far more elaborate standards that are benchmarked with the global standards and in certain cases, they have taken the Indian context also in consideration. In addition to excise commissioners, the food safety commissioners would also look into the enforcement of these standards.

What role can the excise department play to boost revenue to ensure a win-win situation for the government, the consumer and the industry?

Excise Departments faces various challenges. The key from these are revenue enhancement & protection, as well as to ensure person get genuine products. Anti-Counterfeiting solutions like TAX Stamps (Excise Adhesive Label) plays an important role. We believe that State Excise Departments need to study. he importance of Tax Stamps in the global context and apply such solutions in India.

In India, Excise Department need to think about TAX Stamps as tool beyond tax collection tools. The existence of cheaper, less-sophisticated, less effective stamps and marks potentially dilute the value proposition around their use as platforms to implement the global guidelines. Instead of using it is a mere product, they need to reframe their work on their Tax Stamp Programme as an opportunity for consumer and industry empowerment.

The new generation Tax Stamps with technological innovation in security printing, serialised coding, data processing and mobile communications, can be into sophisticated devices with additional roles that related to product authentication, supply chain security & data intelligence. This will ensure and help State Excise Department in building their policy towards reduced consumption and more revenue.

Will a rationing system deter excessive drinking?

We think this differ to case to case basis and lots depend on State Excise Policy. About half a century ago, broad restrictions on who could purchase alcoholic beverages were fairly common. The most extensive of such systems was the Bratt rationing scheme in Sweden in force until 1955, which assigned a quantitatively defined upper limit for spirits purchases per person with different rations for males and females and for younger age groups. Studies have shown that rationing systems in Greenland, Poland and Sweden reduced alcohol-related harm (Anderson & Baumberg, 2006). In Spitzbergen (Norway) there still exists a rationing system for purchases of alcoholic beverages. However, these research are conducting long time back and need to be done in current geographical scenario.

Source: http://www.euro.who.int/__data/assets/pdf_file/0011/191369/9-Availability-of-alcohol.pdf?ua=1

Can cheap liquor manufacturing companies create a fund to help families affected by alcoholics?

Yes, it can be done in partnership with State Excise Department and various NGO. But, before that there is a need of creating & raising awareness at mass level. There is a need to take preventive as well as long term strategic goals. As preventive steps, there is a need of building an eco-systems where consumer get genuine and authentic product and must be involved in authentication process. In longer term strategy, lot of work need to be done towards liquor standardisation, monitoring of ethyl alcohol etc. Even today, in our hospitals are not well trained for treatment for people suffering from hooch incidents. Post the hooch tragedy in Uttar Pradesh, the Government committed find that there is a lack of guidelines in Hospitals for treatment of patients consuming spurious liquor.

Is banning of illicit liquor the way forward? (I think he means about Prohibition of liquor)?

Prohibition is not the only answer. Many times, prohibition leads to increased illicit liquor business. For example, liquor is prohibited in Gujarat, however, according to a recent study 38% youth in Gujarat consumes alcohol. Other than this, 12% people are consuming other forms of drugs such as cannabis. In last two years, police had seized liquor valued `254 crore. The Government had confirmed that due to prohibition there is an increase in smuggling from neighbouring state. In last two years total case reported 1,32,415 country liquor, 29,989 IMFL liquor. Now the state government is demanding compensation cost from central as they are losing `15,000 crore annually due to prohibition. Similarly in other prohibited state Bihar, the sale of other drugs products has increased significantly. As per latest report from Narcotics Control Bureau, Bihar top the chart in consumption of opium and hashish. In our country 16 crore people consume alcohol whilst 3.1 crore people use cannabis. India needs a comprehensive national policy to tackle alcohol and other forms of additives.