Contents - s3.amazonaws.coms3.amazonaws.com/JuJaMa.UserContent/7243da47-51d7-4928-9b6… · Achieved over 4% blending in year 2015‐16. To achieve 10% blending targets. Ethanol Blending

INDIA:The5%ETHANOLBLENDSUCCESSSTORY‐

What’sNext??

Vinay JoshiExecutive Director- Godavari Biorefineries LimtedPresident – South Indian Sugar Mills Association (Karnataka)

Date: 9th November 2016F.O. Licht’sWorld Ethanol & Biofuels Conference, 2016 -Brussels (Belgium)

Contents

•OverviewofEthanolProduction‐ Indiaandtheworld1

• IndianEthanolIndustry2

• FuelEthanolBlendingProgram3

•GovernmentInitiatives‐ What’sNext4

• Challenges5

•GovernmentPolicies forEBP&theirImpact6

• PotentialforInternationalTrade7

•AboutGBL8

2Ethanol Blending - India

WorldEthanolProduction

Ethanol Blending - India 3

Total World Ethanol production in 2015 was 113 Billion litres

Billion Litres

Source: All India Distillers’ Association (AIDA )

EthanolProduction‐ Indiaandtheworld

Produced from Molasses, by‐product of sugar, unlike other Countriesviz. Brazil, USA and European Union which produce from Sugarcane,Corn andWheat.

Directly dependent on Sugar and Molasses production from sugarindustry.

Unlike Brazil, Indian government doesn’t allow Ethanol productionfrom Sugarcane juice. This is essentially to avoid food v/s fuel debate.



Comparison–India&Brazil

Pricing:India:GovernmentadministeredpriceforFuelEthanolandfreepricingforBeverageandChemicalgradeEthanol.Brazil:PreferentialtaxtreatmentbyFederalandprovincialgovernments.

Ethanoldemand:India:DemandsplitamongBeverage,FuelandIndustrial(Chemical).Brazil:DominatedbyFuelEthanol

Feedstock:India:UseofMolassesasfeedstockforEthanol.Brazil:SugarcanejuiceusedasfeedstockforEthanol.

Production:India:Ethanolasby‐productindustry(Annualproduction– 2‐3Bn litres)

Brazil:Co‐productindustryofsugar.(Annualproduction– 30Bn litres)

5


Ethanol Blending - India

IndiaProductionTrend– SugarandMolasses


Source: Indian Sugar Mills Association (ISMA)

IndianEthanolIndustry

EthanolProduction


Source: Indian Sugar Mills Association (ISMA)/Sugarbazaar.com


8

Source:GainReport



EthanolDemand&Supply(Mn Liters)

9

Source:ISMA/GainReport,#Estimated

SugarSeason 2011‐12 2012‐13 2013‐14 2014‐15 2015‐16#

Production 2,956 2,936 2,721 3,121 2,716

Calenderyear 2012 2013 2014 2015 2016

Consumption 2,035 2,062 2,130 2,445 2,360

Imports 34 33 107 217 450

Exports 177 234 175 200 140



FuelEthanolBlendingProgram

Achieve capacities to enable conversion ofmolasses into ethanol for blending with fuel

Achievedover4%blendinginyear2015‐16.

Toachieve10%blendingtargets.


EthanolfromimportedsourcesnottobeusedforEBP

IndianEthanolproductioncanbeusedforBeverages,EBPandbalanceethanolforChemicalindustry.


2002Ethanol Blending started in India- But not made mandatory.

2007Ethanol blending made mandatory at 5% -With a fixed procurement price

2010Program reviewed by Government. Provisional price of Rs.27 per litre ex-factory announced

2012Shifted to Market Determined price–Mandatory blending program continued at 5%

2015Back to Fixed price mechanism. Rs.48.50 per litre(delivered) or about Rs. 40-42 per liter ex-factory.

2015Exemption from Excise duty on Ethanol, thus increasing the ex-factory realization.

Aug2016

Withdrawal of Exemption on Excise duty, thus impacting the ex-factory realization by Rs.5/- per liter.

Oct2016Announced price of Rs.39/- per litre ex-factory for supplies in 2017.

11

EthanolPricingpolicyofGovernmentmovedfromarbitrarypricefixedinitiallythentopricelinkedtoaveragepriceofgasolineandnowtoadministeredprice.


FuelEthanol‐ India

12

India imports nearly 70% of its annual crude petroleumrequirement, which is approximately 110 million tons.

Gasoline consumption in India is about 30,000 Mn litres Fuel Ethanol requirement for :

5% Blending ‐ about 1500 Mn litres10% blending – about 3000 Mn litres

Government of India now is very committed to use of ethanol asfuel

It is expected to benefit Oil industry in long run

It is expected to help sugar industry to pay high FRP (FairRemunerative price) fixed by Government of India to sugarcanefarmers.



EthanolBlendingRatetoMotorSpiritSales

13

Source:ISMA/OMC’s ,SY‐SugarYear(Oct– Sept),*MSSalesspirit‐ estimated

Ethanol Procured (TKL)

All India MS Sale (TKL)

EBP %

SY 13-14 379 24776 1.53%

SY 14-15 674 28967 2%

SY - 15-16 (till Sept' 16)

930 25400* 4%



14

Source:http://ethanolrfa.org/




EthanolblendingstartedinIndiain2002and5%indigenousethanolblendingwithgasolinemandatorysince2007.Ethanolrequirement– 1.3bn liters

Indiahasdoubleditstargetofindigenousethanol blendingwithgasolineto10%,asitaimstopromotecleanerfueltotacklepollutionandenablesugarfactoriestopayremunerativesugarcaneprice.Ethanolrequirement– 2.7bn liters

Introducinganew‘PolicyonNon‐ConventionalResources’ asitplanstotakeupindigenousethanol blendingingasolineto22.5percentandindieselto15percent.EthanolRequirement@15%‐3.99Bn [email protected]%‐ 5.99Bn litres

GovernmentInitiatives‐ What’sNext?

DemandandSupplyofFuelEthanol

FeedstockExisting Projected

C‐ HeavyMolassesorFinalMolasses

B‐ Heavy MolassesorIntermediateMolasses

Cellulosic Ethanol

Produced Annually(Milliontons)

12 18 0

PotentialAlcoholProduction(Millionlitres)

3120 5850 8813


SectorsExisting Projected

AnnualRequirement(Millionlitres)



Beverage grade Ethanol 1000 1000 1000

Blending withgasoline @5%1300 @10%2660 @22.5%5985

ChemicalIndustry 750 750 750

Total 3050 4350 7735

SupplySide:

DemandSide:

GovernmentInitiatives‐ What’sNext?

CHALLENGES

Availabilityofrawmaterials

SupplySide‐ProductionCapacity

CellulosicEthanol

Demandside Uniformduties&taxes

Ethanolpricingpolicy


18

CapacityGap‐ 0.42Bnlitres

ProductionCapacity2.24Bn litres

CurrentdemandforCY2016

2.66Bn litres@10%FuelBlending

Challenges‐Production Capacity


19

Challenges ‐Production Capacity

Opportunityforpotentialforinvestment

Productioncapacityneeds

tobeaugmented

Increasetheoperatingcapacitiesof

existingEthanolunits

Advanced bio-fuels from

locally available agri-biomass

resources, particularly

multi-feedstock ligno-cellulosic

material

Promoteuseofalternatecropssuchassweetsorghum,sugar

beetetc.especiallyforBeveragegrade

Alcohol

PermituseofSugarcanejuicefromsurplussugarcaneforEthanol

production.

(5%‐10%ofexistingsugarcane

production)

(estimateddemandofabout1000Mnlitres)


Challenges‐AvailabilityofRawMaterial

India is a surplus sugarcane and sugar producer for last 5 years andexpected to remain so in next few years too

Surplus sugarcane upto 10% of total sugarcane production can be usedfor Fuel Ethanol

Production of ethanol directly from sugarcane juice is not allowed

Moreover, Ethanol production directly through sugarcane iseconomically unviable for sugar mills due to high sugarcane price fixedby Government

Need to incentivise ethanol production and modify existing policy

20

B‐heavy (‘intermediate’) molasses can be diverted away from sugar to make FuelEthanol.

• Can increase Ethanol supplies by 3 Bn litres.

• Can help in Ethanol blending up to 15%

• Mills need adequate compensation from ethanol to substitute sugar production.


Challenges‐ CellulosicEthanol

Need to invest in Cellulosic Ethanol plants from (agri‐waste, grass orinedible parts of plants) for ethanol production.

India has more than 450 million tonnes of biomass waste (rice & wheatstraw, cotton stalk & sugarcane bagasse). Much of the biomass is beingused as manure/bio‐fertilizers or other wise burnt.

Surplus biomass in the country is about 142 Million tons.


Surplus biomass/year

% of Biomass converted

Biomass required

for Ethanol

Ethanol produced

Ethanol required for Blending

MMT % MMT Mn litres Mn litres

142 25% 35.4 8,813 @5% 1300

142 50% 70.8 17,625 @10% 2600

Source: AIDA

Utilizing biomass at even 25% can help in implementing more than30% blending

Cellulose ethanol provides stable non‐commoditised input cost andalso avoids the food vs. fuel debate

Challenges –

High capital cost of Cellulosic Ethanol project.

Collection of agri‐waste which is feedstock for Cellulosic Ethanol.


Challenges‐ CellulosicEthanol

Challenges‐DemandSide

23

Individual Oil depotcapacity to take 10%ethanol for blending.

Estimated Demand forblending;5% 1.5 Bn litres10% 3.0 Bn litres

To encourage supplies to deficit States, compensate supplier for longer distance depots.

OMCs need to improve:- Tendering Process- Ethanol lifting and Storage at Depots- Obtaining necessary permission from Central and State governments.

Government need to notify the approved changes in

IDR Act for free movement of Ethanol across India and uniform duties and taxes.

Source: ISMA


Challenges– EthanolPricingPolicy

24

CurrentStatus:

FixedpricepolicydependingondistanceofDepot

WithdrawalofexemptiononExciseduty

Pricingpolicyneedstobechanged:

Long term visibility on Pricing – Pricing linked to Sugarcane price orrevenue from Sugar

Long term tax incentives visibility for fuel ethanol.

Pricing policy should be such that it encourages conversion ofsugarcane juice into Ethanol or B Heavy Molasses to Ethanol


GovernmentPoliciesforEBP&theirImpact


Asgovernmentfixedtheremunerativeprice,contractedquantitywiththeOilMarketingCompanies(OMCs)increased.

GovernmentIncentivesforEBPinotherCountries

• Upto 10% Blending started in late 1970’s.

• From 2004, blenders received a tax credit for each gallon of Ethanol blended.

• As of 2011, blenders received a US$0.45 per gallon tax credit.

• ‘Environmental Working Group’ estimated that cumulative ethanol subsidies between 2005 to 2009 were US$17 billion.

U.S.

• Mandatory blending between 1976 and 1992 of 10% to 22%

• Flex Fuel vehicles introduced in 2003

• Differential tax rates for Ethanol and gasoline followed both by Federal and Provincial govt.

Brazil

• Model of incentivising higher blend percentages through differential tax rates.

• For ex: Unblended attracts tax rate of 7.70 Thai baht, however blending of E-85 has tax of 1.16 Thai baht.

Thailand

• Fixed price mechanism.

• Withdrawal of Excise duty on Sales @ 12.5% only for 8 months , which has been withdrawn now.

India



PolicydispensationrequiredforgrowthofEthanolIndustry

27

RequiredLongtermEthanolPricingPolicy.

TaxincentivesforEBPtobeintroducedandExcisedutywaiverinIndiashouldbecontinued.

RemoverestrictiononInterstatemovementofEthanol.ImplementationofchangesinIDRAct.

EthanolproductionandStoragecapacitiestobeaugmented,forwhichlargeinvestmentandlongtermstablepoliciesneeded.

SecondgenerationEthanolfromAgri‐BiomassneedstobeincentivizedbyGovernment.

NeedtodevelopasuitableFlexibleFuelVehicle(FFVs)programforutilizinglargerpercentagesofEthanolforblending.



PotentialforInternationalTrade


GoodpotentialforimportsofIndustrialgradeEthanoltoIndianusers.

Government of India has reduced theImport duty on Denatured Ethanol from5% to 2.5%w.e.f.1st April 2016.This is to enable chemical industry tosource feedstock at competitive pricing.Beverage grade ethanol attracts animport duty of 150%.

ShrunktheavailabilityofDomesticSupplytoChemicalandBeverageIndustry.

EBP requirement of Indigenous Alcohol

Limited and Fragmented

Ethanol Production Capacity

High blending

norms under EBP

Diversion of Ethanol for fuel blending –

Relatively high price

Consistent demand for Beverage

grade Ethanol

EthanolTrade‐ INDIA

29

CalendarYear

Imports(Mn ltrs)

Exports(Mn ltrs)

2012 34 177

2013 33 234

2014 107 175

2015 217 200

2016* 450 140

Source:GAINReport* - Estimated

India is a net importer of Ethanol.

India is exporting beverage grade ethanol and imports of Industrial Ethanol is mostly byChemical Industries



Journeyofhigherimports– Alreadyinitiated


Buyersofimportedethanolarepredominantlychemicalmanufacturers.


GODAVARIBIOREFINERIESLTD(GBL)


AboutGBL…


Sugar

Ethanol

Bulk Organic Chemicals

Specialty Chemicals

Somaiyagroupestablishedin1939isoneoftheoldestandwellestablishedindustrialhousesinIndiaandhasdiversifiedinterestin:

Renewable energy

Agriculture & AgriculturalResearch

Education

Healthcare

…AboutGBL


Through its journey of 70 years has created a well integrated sugarcaneprocessing complex .

More than 30,000 farmers are GBL’s shareholders.

A leading manufacturer of Sugar, Ethanol, Organic Chemicals, Power &Bio–fertilizers.

Actively pursuing the goal of creating a unique Biorefinery using green &renewable sugarcane as a feedstock.

It is one of the largest producers of Ethanol & a pioneer inmanufacturing of Ethanol based Chemicals in India.

…AboutGBL


Created social infrastructure namely schools, vocational & educationinstitutions etc. along with business units in and around its places ofbusiness in rural India.

Provides micro‐finance, fertilizers, seeds to farmers in order to developmutually beneficial relationship. It ensures stable feed‐stock supply andpositive social environment.

Established an agricultural research institute – KIAAR which worksclosely with farming community to develop better and higher yieldingvarieties of cane & improved agriculture practices.

GBL’sValueChain


GBL’sMilestones


‐ Processing over 2 Million MT of Sugarcane per year and producingabout 2,25,000 – 2,50,000 MT of sugar per year.

‐ Sameerwadi sugar factory is ranked No. 1 amongst all the sugarfactories on All India basis in terms of sugar production for last 3sugar seasons.

‐ Leading supplier of sugar to beverages, chocolates andconfectionary manufacturers (Multinational Corporations) in India.

‐ Renewable Power plant capacity 50 MW.

‐ Ethanol Production Capacity ‐ 85 Mn liters p.a.

‐ Leading manufacturer of Beverage Grade Ethanol, Fuel Ethanolused in blending with gasoline & Industrial Ethanol.

‐ Produces various “Green & Renewable” chemicals using Ethanol asfeedstock.

‐ Among top 10 producers in the world of Ethyl Acetate withproduction capacity of 80,000 MT p.a

Ethanol&Bio‐chemicals


GBL is one of the largest exporter of Ethanol based chemicals from Indiato various destinations in Europe, Africa. Middle East and Far East Asia.

BulkChemicals:

EthylAcetate– (SolventusedinInks,Paints,Perfumes,Photographicfilms&PlatesandasflavorinPharmaceuticals)

Acetaldehyde– (UsedinManufacturingofPerfumes,plastics,Syntheticrubber,pesticidesflavors,andpharmaceuticals)

Paraldehyde(Usedasasedative)

TriEthoxyButane(TEB)– (Usedasfrotherinminingindustry)

EthylLactate(UsedforCleaningofPrintingEquipment,RollsandLithographicPlates)

SpecialtyChemicals:

Crotonaldehyde(WarningagentinFuelGasesandasasolventinorganicsynthesis)

3‐METHYL‐3‐PENTENE‐2‐ONE(MPO)(Perfumeintermediate)

1,3ButaneGlycol(Multi–functionalemollientusedin

PersonalCare)

OurMajorCustomers


Coca Cola Nestle Mondelez(Cadbury)

Diageo BioconLimited

Cargill International

BASF National Paints

BaxChemicals

Helm AG

Henkal CAC Limited

The Hershey’s


FSSAI LicenceFSSC 22000

SugarUnit’sCertifications

GBL– AStarExportHouse


Star Export House Status

GBL’sIntegratedBio‐refinery


Sugar Plant - Karnataka, India Power Plant - Karnataka, India

Ethyl Acetate Plant - Maharashtra, India Crotonaldehyde Plant - Maharashtra, India


Ethyl Lactate Pilot Plant -Karnataka, India

Bagasse Cellulose Pilot Plant - Karnataka, India

PilotScalePlants– Designingthefuture


THANKYOU

Documents

Contents - s3.amazonaws.coms3.amazonaws.com/JuJaMa.UserContent/7243da47-51d7-4928-9b6… · Achieved over 4% blending in year 2015‐16. To achieve 10% blending targets. Ethanol Blending