India’s ethanol push requires a relook
India’s ethanol blending programme, promoted to reduce crude oil imports, conserve foreign exchange and support farmers, is increasingly facing economic concerns as rising ethanol production capacity exceeds demand, suggesting the policy focus is shifting from energy security and import reduction towards absorbing surplus domestic ethanol supply.
The logic behind India’s ethanol push appears compelling: blending more ethanol with petrol will help cut crude oil imports, ease pressure on the current account by conserving foreign exchange, support the rupee and raise farm incomes.
At a time when India imports the bulk of its crude oil requirements and external balances remain sensitive to oil prices, the argument has found wide acceptance. But the economics increasingly suggest otherwise.
The ethanol push now appears to have more to do with absorbing excess production capacity than reducing India’s import dependence. The challenge has shifted from building supply to finding demand.
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Source : The Hindu Businessline
