Insight Conversation: Pinaki Mukherjee, Zuari Envien Bioenergy

This seven-part Insight Conversation series examines the opportunities and challenges in Asia's biofuels sector. In this second part, we speak to Zuari Envien's CEO Pinaki Mukherjee about India's biofuels sector. The next edition features Ed Mason, CEO of Jet Zero Australia, on opportunities and challenges in Asia's sustainable aviation fuels sector.

India's biofuels sector has made significant pivots to increase the country's biofuels usage and reduce import dependency. The industry is currently working toward meeting a 20% ethanol blending by 2025 and 5% biofuel blending by 2030 as mandated under the National Policy on Biofuels.

The biofuels sector, however, is facing several challenges and bottlenecks in its efforts to achieve these ambitious targets.

Zuari Envien Bioenergy CEO Pinaki Mukherjee talks to S&P Global Commodity Insights Editor Sampad Nandy about these challenges, including the delays in biofuel adoption in the automobile industry, and points to Brazil as an example, where the flex-fuel car market is driven by supportive government policies, including tax exemptions for biofuel-driven cars.

Mukherjee has nearly three decades of experience in the power and renewables sector and leads Zuari Envien's bioenergy business. Zuari Envien Bioenergy, a joint initiative by Zuari Industries of India and Envien International, headquartered in Slovakia, has made significant efforts to enhance India's domestic capacity to produce ethanol.

What are the challenges impacting the Indian biofuels sector? Are there logistical bottlenecks in sourcing agricultural residues for biofuels supplies in India?

Indian biofuels sector faces several key challenges. Firstly, agricultural feedstock remains a major hurdle due to the unorganized nature of the industry. Securing enough agricultural produce for ethanol production is hard without relying on intermediaries, which complicates long-term supply stability.

Second, biomass availability for fuel is critical, with ethanol plants relying heavily on seasonal sources like bagasse and rice husk. These biomass types pose challenges in transportation and storage due to their volume. Efforts to produce biomass pellets are underway to mitigate some of these logistical issues.

The market for dried and distilled grains, particularly DDGS [dried distillers grains with solubles] from rice and maize, also fluctuates significantly, posing additional challenges for consistent revenue streams.

India achieved only 11.96% ethanol blending as of March 31. Is it feasible for the country to reach its 20% ethanol blending target by 2025? What role will imports play in achieving this target?

Going from 11.96% as of March 31 to 20% by March 31, 2025, requires a 40% increase in installed ethanol distillery capacity. Given the number of new distilleries under construction, it would be fair to state that there would be an increase in the production of ethanol and consequently of blending by 2025.

Importing biofuels could potentially undermine India's agricultural sector, which significantly contributes to the national economy and rural livelihoods. However, exploring imports during maize shortages, as seen with recent imports from Myanmar, remains an option.

The government had restricted ethanol production from B-heavy molasses in December 2023 and later capped sugar diversion to 1.7 million mt. Recently, it allowed sugar mills to use their existing stock of B-heavy molasses. How much has the industry been impacted by this development?

The government has traditionally monitored the cost of sugar through various mechanisms to keep sugar prices from fluctuating and impacting the end-consumer.

The restrictions and subsequent permission to use any feedstock for ethanol production in the sugar industry is derived from the government's calculations of desired sugar stocks nationwide. This definitely reduced ethanol production for sugarcane-based distilleries.

What are the current challenges in terms of ethanol production? What role would grain-based ethanol play in meeting the industry's requirements?

Multiple distilleries that are being set up in the same general area will create competition for biomass residue as well as grain, driving up prices and reducing availability.

Traditionally ethanol has been produced from sugarcane juice or molasses in India. Lately, more grain-based distilleries are being set up.

In the last few years, broken rice has been used as a feedstock, but the trend is moving to using maize. India produced about 35 million mt of corn in 2023, but Indian yields are low when compared to world averages.

With the same acreage under corn cultivation and better farm management techniques, there is a potential upside to increase production to meet feedstock demand of distilleries.

Given your extensive experience in the biofuel industry, what are the main challenges you face when adopting biofuels?

One main challenge to adoption of biofuels is the automobile industry. All components used in cars and motorcycles are designed to use petroleum-based fuels. These components have had a long history of evolution from a material science perspective and have been proven to be reliable. However, when these same components interact with biofuels, there are chances of accelerated material degradation.

From a safety and reliability standpoint, the automobile industry must gear up to manufacture vehicles that can use higher biofuel blends. This can be done, as the experience in Brazil demonstrates.

What are the key areas that you see for potential expansion and the future of India's biofuels sector?

Biogas is a key area, and it has already been given a policy impetus by the government. This sector will see rapid growth in the coming years.

We are open to sourcing UCO, animal fat and tallow inputs for bio-diesel production. However, the quantity of production is not assured, since most of the inputs are from the unorganized sector and consolidation is difficult for industrial production of biodiesel.

What steps are needed to ensure the ethanol industry remains profitable in the long term? Outside of government incentives, how can Indian biofuels players create economies of scale?

While the government has adjusted ethanol prices responsively, increased input costs due to heightened distillery competition have posed challenges. Additionally, ensuring the quality of DDGS remains crucial for profitability, necessitating industrial drying of maize to mitigate quality concerns.

Indian biofuel players can achieve economies of scale by setting up distilleries in different locations in India that are in proximity to grain-producing areas to reduce logistical and transportation costs.

Also in this series:

Insight Conversation: Alexander Kueper, Neste