India Ratings and Research (Ind-Ra) expects that India’s ethanol blending rate will keep rising in ESY24 (ethanol supply year, November-October), even with restrictions on the use of sugarcane-based ethanol.
The anticipated reduction in supply from sugarcane due to these restrictions is expected to be counterbalanced by an increase in supply from grain-based sources, particularly maize. This will likely result in a blending rate of approximately 14% in ESY24 (compared to 12.1% in ESY23 and 10.0% in ESY20), which is only slightly below the government’s 15% target.
“While the target of 20% ethanol blending in petrol by 2026 still appears ambitious, given the feedstock availability and vehicle compatibility related challenges, the ethanol segment could witness double-digit growth even with a blending rate of 16%-17%. The over 200% increase in the blending rate between ESY20-23 was largely driven by sugarcane sources, and growth over ESY24-27 is likely to be led by grain-based distilleries. However, given the feedstock integration and high correlation between input and product price movements, the profitability of cane-based ethanol is likely to remain more stable than that of grain which remains susceptible to volatility in input prices”, says Khushbu Lakhotia, Director, India Ratings and Research.
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