In March 2021, Bihar became the first state in the country to implement an Ethanol Promotion Policy that would allow investors to directly produce ethanol from molasses, maize, broken rice and rotten grains.

Much of the credit goes to minister Syed Shahnawaz Hussain and bureaucrats from the state industries department for floating the idea, planning the policy, and advocating for the plan with the Centre and stakeholders.

Additionally, the Union government has permitted the Bihar government to operate 17 ethanol production units with a combined production capacity of 36 crore litres. These have been planned in Seemanchal districts of Muzaffarpur, Bhojpur, Nalanda, Purnia, Buxar, Begusarai, Madhubani, Gopalganj, East Champaran, and Bhagalpur that have traditionally been associated with very high production of sugarcane and maize, besides having access to abundant water (sugarcane and maize are considered water-guzzling crops).

The question then arises is why this sudden peak of interest in ethanol, what is this ethanol, and why specifically in Bihar?

What Are Biofuels And Ethanol; How Is It Produced, And How Can It Be Used?

A biofuel is any hydrocarbon fuel that is produced from organic matter in a short time (compared to a fossil fuel which is produced from fossils that have taken millions of years to form).

Biofuels are first, second, third, and fourth generation depending on the source and mechanism of production.

Ethanol or ethyl alcohol is a magical fluid with multiple potential uses — at 95 per cent purity, it is the intoxicating attribute to alcoholic beverages, while at 99 per cent+ purity, it can be used as a biofuel when blended with traditional fuels such as petrol or diesel.

Ethanol that is prepared from molasses — a byproduct of sugar manufactured from sugarcanes or maize, and broken rice grains — is added to petrol in a mandated proportion to create biofuels with reduced emission potential.

Of course, sugar mills can manufacture ethanol directly from sugarcanes without the need to produce sugar at all.

Why Is The Government Of India Talking About It?

The Government of India has recently been promoting the Ethanol Blended Petrol (EBP) programme, where Oil Marketing Companies (OMCs) are encouraged to sell petrol blended with ethanol, to reduce vehicular emissions.

This is following the launch of a National Policy of Biofuels 2018, where an indicative target of 20 per cent ethanol blending (E20) by 2025 was envisaged.

That is in keeping with the broader consensus of the Modi government to move India towards an "energy independent" nation and in keeping with India's five-point climate action plan at COP26.

So far, roadblocks to the adoption of ethanol have been limited availability of feedstocks, high taxation, and limited investment in ethanol projects. The government, both at the Centre and in the state, is planning to tackle that by pushing for the adoption of alternative crops such as sugarcane and maize as raw material, reducing GST on E20, and inviting Oil Marketing Companies (OMCs) to set up production units in favourable regions such as Seemanchal area of Bihar.

In addition to E20, the Government of India is also creating and promoting new policy ideas in this sector such as Pradhan Mantri JI-VAN Yojana, 2019 where the objective is to create an ecosystem of commercial projects and research and development in 2G Ethanol.

What Is The Bihar Government Doing?

In keeping with the broader National Policy of Biofuels 2018 at the Centre and its Ethanol Promotion Policy, Bihar state is on line to becoming the first major state to produce ethanol as a source of biofuel.

As per the state's policy, an investor would get a 15 per cent subsidy, in addition to exemption from stamp duty, registration and land conversion fees, electricity subsidy, and employment and skill development subsidy. It would create inroads for Bihar to become an Ethanol hub and an attractive investment destination for oil manufacturing companies.

What Are The Unintended Benefits?

Unintended consequences are most often only cited in retrospect. But here, one can say with just as much certainty, the positive effects of the proposed biofuel policy on the state's economy.

For starters, launching such a progressing initiative will greatly improve the state's ease of doing business scores.

Secondly, it will push for the industrialisation of a state which perennially suffers from under-investment in industrialisation. Additionally, it would generate employment, develop skills of local youth and semi-skilled and unskilled labour force, create new microeconomies around these production units, and greatly utilise already existent sugar mills and large sugarcane production of the state.

Bihar also suffers from heavy air pollution, most of it due to vehicular emissions. Biofuel production in the state will greatly incentivise automobile manufacturers to introduce vehicles with biofuel friendly technology that will reduce the costs for vehicle owners and hence raise the demand for vehicles in the state.

Bihar is also notoriously famous for its alcohol prohibition policy and rising cases of crimes and tragedies associated with the policy. An ethanol promotion policy that focuses on ethanol as a source of fuel greatly creates awareness in the society and generates a positive, forward-looking mindset around usage and consumption of alcohol that goes beyond a recreative and addictive attitude towards ethanol.

Conclusion

Bihar has traditionally been heavily dependent on agriculture as a major source of economic productivity. But due to climate change, frequent flooding, loss of labour due to migration, and lack of incentives, the economy in Bihar is struggling.

With the lack of any major industry, mines, power plants, or manufacturing centres, the economy of Bihar is playing catch-up with the rest of the states, including its erstwhile BIMARU partners.

Biofuel production from ethanol is a futuristic fuel-saving, emission-reducing technology that is seeing rapid uptake in major automobile industries, including a highly popular adoption into Formula 1 engine technology.

Major automobile manufacturers from Japan are also turning towards biofuel as a solution to the decarbonisation of engine technology. The production of ethanol utilises resources (sugarcane and maize) that are locally available and heavily produced.

So far, no other state has adopted the production of ethanol as a biofuel as eagerly as Bihar and hence allows Bihar to leapfrog ahead of the rest of the country in this segment.

Any early adopter of any new technology has the upper hand in deciding policies, leveraging experience, and setting the trend. Here is an opportunity for Bihar to rise once again as the harbinger of socio-economic change in India and the world.

Ankit Raj

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