Ethanol mandate creates headache for India

A shortage of ethanol is prompting India's government to consider shelving its newest biofuel mandate as it deals with several roadblocks.

India increased the ethanol blend requirement to 10 percent of petroleum starting in October. But the price of sugarcane increased, making molasses-based ethanol a less attractive option for sugarcane crushers (see India to delay October's ethanol mandate).

Despite an inefficient supply, the mandate has remained in effect. But the new government in India is likely to take up the issue at the end of the current elections on the advice of the ministries of petroleum, agriculture, and chemicals & fertilizers, according to a report in the Economic Times.

In addition, lawmakers are trying to sort out trade barriers between Indian states. The government is looking to change ethanol to a 'goods' taxation status to prevent states from increasing the cost of ethanol with duties.

And the government is also awaiting the results of a study on how a 10-percent ethanol blend affects engines. 

Oil imports account for 77 percent of total fuel consumption in India, so the government has encouraged the production of biofuels to increase supply and lower prices. 

Ethanol is making some headway, but the government lacks the regulatory framework for blending biodiesel into existing diesel. The permitting process is so complex that many biodiesel producers are exporting biodiesel (see Indian biodiesel producers rethink export-only status).

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