Page 52 - Banking Finance April 2025

ARTICLE

It is pertinent to mention that it is advantageous to use for the country to achieve a target of 20% ethanol blending
maize over rice and sugarcane for ethanol production for a in petrol.
variety of reasons. Some of the benefits of preferring maize
over rice/sugarcane for ethanol production are as follows: The main issue is the availability of raw materials (sugar-
cane, maize and rice/damaged grains) at economically vi-
Comparative Advantages Associated with Usage able prices. As per the Grain Ethanol Manufacturers Asso-
of Maize for Producing Ethanol Vis-à-vis Sugar- ciation, the grain-based ethanol producers are currently
selling ethanol to oil marketing companies at a loss of Rs 8-
cane/Rice
9 per litre.
a) India is the 5th largest producer of maize in the world
b) Only about 20% of the production is consumed by hu- This is due to the high prices of rice and maize. The Associa-
mans tion contends that the industry has about Rs 20000 crores
of term loans from banks and if the ethanol producers con-
c) Crop requires less water as compared to rice/sugarcane
tinue to sell ethanol at a loss, the bank advances run the
d) Crop can be grown throughout the year risk of turning bad.

Comparative Disadvantages Associated with Us- On the other hand, the Poultry Federation of India argues
age of Sugarcane/Rice for Producing Ethanol Vis- that the increased demand of maize from ethanol produc-
à-vis Maize ers has led to increase in the prices of maize which is a major
component of feedstock for poultry birds. This has led to
a) Both are crops predominantly consumed by humans. In
increase in costs for the poultry industry and adversely af-
a developing country like India where a large portion
of the population is unable to get optimum nutrition, it fected their margins since poultry prices have not increased
correspondingly.
may not be feasible to spare these crops for ethanol
production
In fact, in our country, about 60% of maize production is
b) Both are water guzzling crops used for making feedstock for cattle and poultry industry.
c) Sugarcane has a relatively long crop cycle of 18 months Only about 20% of maize production is used for human con-
sumption.
d) Both require huge subsidies in the form of fertilizer sub-
sidy and electricity subsidy (to run diesel gensets for One of the ways in which the availability of maize in the coun-
drawing out water) try can be increased is by reduction of import duty on the
e) Production of both consumes fossil fuels in the form of cereal. Currently, the import duty on maize is as high as 50%.
diesel for running gensets for pumping groundwater Recently, in June 24, the government allowed import of 5
lac tonnes of maize under the Tariff Rate Quota (TRQ) sys-
As per the projections by Govt of India, to achieve a blend- tem which enables import under reduced import duties. But,
ing percentage of 20%, the country will need to produce it is to be noted that such ad-hoc measures can have only
13.50 billion litres of ethanol in every ethanol supply year short term positive impact on the availability of maize in the
which spans from November of year to October of next year. country. If the ethanol manufacturing industry has to become
This production of ethanol includes ethanol to be used for successful in the long term, then there should be supply of
other purposes also, apart from ethanol used for blending adequate quantities of maize on a sustainable basis.
with petrol. Out of the total production, 10.16 billion litres
of ethanol is projected to be used for blending. Another option that can be considered is the introduction
of Genetically Modified (GM) maize varieties in the coun-
As per data released by Department of Food and Public try. The ethanol manufacturing as well as the poultry indus-
Distribution, Govt of India; the ethanol production capacity try have also been batting for the same. These varieties of
in the country stands at about 16.5 billion litres. So, it can the crop have higher yield than the varieties being currently
be said that the capacity for ethanol production is sufficient grown in the country.

BANKING FINANCE | APRIL | 2025 | 47