Opportunities for Ethanol Export in Key Target Markets

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Ethanol in India – a Journey
Amit Sachdev
India Consultant
U S Grains Council
NEC’16@New Orleans

2. Area of Interest
Total Population of India
Approx. 1.26 billion
Will surpass China by
2028

3. Economic Growth
Within the group of countries – many challenges; due
to; Sheer number of people and diverse views
• Politics
• Trade
• Science
India always has has an ambition to be self sufficient /
self reliant in agriculture and other commodities, but
the reality is totally different
Economic growth of over 7% and projection of 7.7% over the
years has led to increasing purchasing power for the 300
million strong middle class and increased demand across the
categories
• Food & Feed
• Cars
• Houses
• Telecom
Leading India to be a net importer of many food and non food
items
• Pulses/Lentil 5.5 MMT
• Vegetable Oil 15.5 MMT
• Corn 0.5 MMT
• Oil meals
• Ethanol for chemical use

4. Ethanol production in India
Grain Based
• Total capacity to use 3 MMT
of grain to convert to
ethanol
• Of which 1 MMT or more is
corn and the rest is Rice &
Sorghum
• All of the grain based
ethanol is for beverage
industry – Whiskey
• India is the largest market
for Whiskey and moving
from a molasses based
whiskey to grain based
Sugar Based - Molasses
• Sugar is the primary
product and molasses
which is a co-product is
converted to ethanol
• Not all sugar factories
have integrated ethanol
plants

5. History of fuel blend mandate
• 2002; notified use of upto 5% ethanol for blending by the Oil Marketing
Companies (OMC)*
• 2007; 5% use of ethanol made mandatory and price fixed by GOI. Since
no offtake, program was shelved; price fixed by GOI
• 2008; Import tender for ethanol; no purchases
• 2010; Pricing policy changed, program took off
• 2014; Fixed price announced as an incentive to sugar sector to pay off
the arrears for sugarcane purchase (no direct blend program, but an
indirect sugarcane subsidy program – sugar being a politically sensitive
commodity). Final supplies 820 mill liters (216 mill gallons) against
requirement of 1.56 billion liters (412 million gallons). Effective blend
rate 3.56%
• 2015: E10 mandate, tender for 2.66 billion liters (703 million gallons) @
$2.66/gallon. Effective supplies committed 1.04 billion liters (275 million
gallons). Effective blend rate 4.34%
• 2017: E20????
• * OMC’s are all Government owned
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6. Demand; Supply; Deficit
6 Source: data from Industry, Industry Association
Gasoline requirement; Ethanol requirement; Production and Supplies in Mill Gallons
2014/15 2015/16 2017/18
Gasoline requirement in India 6084.66 6328.04 6844.41
Ethanol Required 5% 304.23 tender for
10% 608.47 632.80 703.70
Target 2017 20% 1368.88
Ethanol Production
Molasses Route 392.86 392.86 no change*
Sold to Oil Marketing Companies 216.93 275.13 39.10 % Utlized
% age use 3.57 4.35
Total use by Industrial/Chemical 240.74 264.81
Diverted from Molasses route to Industrial 175.93 117.72
From grain based or imports 64.81 147.09
If all of molasses based ethanol is diverted for blending
Effectve usage 6.46% 6.21%
Deficit in Industrial sector 175.93
Potential to produce ethanol via molasses route (By 2020 ?)
793.65
E10 Mandate* 740.00
divert to industrial use 53.65
Deficit that will need to be fulfilled 211.16 for chemical sector
* In affect production could be low as sugar production
is expected to be down

7. History: Imported ethanol
• Grain based ethanol cannot be
used in the blending program*
* Interpretation: domestic grains
may not be used to produce
ethanol for blending (non food
commodity to be used)
• Tender for imported ethanol in
2008 – no purchases were
made as price was high
(obvious reason, as commodity
prices were higher and hence
ethanol prices and then the
fuel v/s food debate)
* but whiskey can be produced
using domestic grains

8. Import Policy; Duty structure
Duty 7.5% and because of
India’s FTA with Brazil –
concession of 20%; duty effective
duty will be 6% in imported from
Brazil
Indian import policy for denatured
ethanol – NO HYDROCARBONS
and NO GASOLINE. While from
the US the product is exported for
blending in fuel, it is used as an
ingredient for chemical
manufacturing. ITCHS code is
2207 (UNDENATURED ETHYL
ALCOHOL OF AN ALCOHOLIC
STRENGTH BY VOLUME OF
80% VOL. OR HIGHER; ETHYL
ALCOHOL AND OTHER
SPIRITS, DENATURED, OF ANY
STRENGTH – 22071090 (un-
denatured) and 22072000 (Ethyl
alcohol and other spirits,
denatured, of any strength.
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9. Price Comparison
US Ethanol
$1.47/gal + Freight + Duty (7.5%) = $2/gal
Brazilian Ethanol
$1.94/gal + Freight + Duty (6%) = $2.46/gal
Indian price $2.66/gallon
Lower for chemical $2.11/gallon (but not many sugar mills
interested to sell to chemical)
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10. Climate change – India’s
commitment
• Most recently India
announced plans to cut CO2
emissions per unit of gross
domestic product -- by up to
35 percent from 2005 to
2030.
• The other problem being high
particulate matter in the air in
the metro cities like Delhi,
Bombay, Kolkata and
Chennai and also the fast
developing tier 2 and Tier 3
towns.
• As the incomes grow, more
and more people can afford
cars and that is adding to the
air pollution in the cities.
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If India needs to show commitment –
small time measures like odd-even
rule have no meanings. Fuel blending
mandate must be fulfilled.

11. Pollution Scare – leading to

12. Pollution: Not only because of Vehicles
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13. Pollution: North v/s South
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14. MITIGATIONS
Mitigation
of Air
Pollution
Sustainable
Development
International
Conventions
and Treaties
National and
International
funds, Eco-
Conversion
New
Technologies,
Recycling
Lower
Combustion
Lower
Transboundary
Emissions
Lower
Emissions

15. Road Map – promoting ethanol
blending in fuel
• Share US story – assisting the farmers
(Sugar), pollution control in cities; but more
important is fulfilling the mandate
(commitment)
• Mapping the current ethanol demand and
supply; port and OMC infrastructure
• Creation of a working group (India- US)
under USIBC essentially to create a white
paper fuel blending advantage; pollution;
health benefits; octane, discontinue use of
MTBE etc – target Sept 2016
• Present the paper to Minister of Road
Transport; Niti Ayog; Prime Minister’s
Office – the dialouge must remain open
and information should be exchanged
• Continue to provide price information on
ethanol that will help make decisions in
favor of US ethanol
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16. Summary
• 17 percent of world population on 3% of world area; 28th largest
trade partner with US. Current trade $100 billion, target $500
billion. Ease of doing business rank now 130, Target by Modi
Government under 50.
• Biggest bottle neck – contract enforcement. Intentions are good,
rules regulation are in place; lacking in political will.
• Energy requirements are soaring and along with that climate
change issues must be tackled.
• New administration want to trade and work with US administration
closely and aims have US as the largest trade partner (Defense,
Agriculture, Trade)
• Water has become a major concern for Indian agriculture and
climate change will affect water availability. India will need to step
up is Climate Change agenda.
• Market is there – but not a short term market, opportunities for
long term engagement in India.
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