Ethanol blending program in India: An economic assessment

Abstract

ABSTRACT Importance of ethanol as a fuel has ever been increasing owing to its contribution to energy security, and carbon footprint reduction. India launched its ethanol fuel blending program in 2003 but the progress has lagged the targets despite various efforts. This study analyses the demand-supply gap in ethanol industry along with Government’s initiatives such as tax reforms, import policies and expansion of ethanol production in Indian context. The study evaluates viable ethanol prices in different scenarios and economic feasibility of second generation ethanol projects including and excluding social cost of carbon. To promote ethanol fuel blending, favorable taxation policies are helpful while ethanol import can only be a short term measure. Government’s initiatives and reforms are aligned in the right direction to promote ethanol fuel blending program. Further, growing value of social cost of carbon indicates importance of second generation ethanol production in India.