Why Ethanol blending in fuel is Important

This blog is about a trending sector that is going on in the market and a lot of people are talking about this sector and that is the ethanol blending department or the ethanol sector so a lot of ethanol stocks are rallying in the last few days and we want to know why this is happening we will try to understand why ethanol blending in India is so important especially in the fuel what is the history of ethanol blending in India what are the environmental gains for this program in India for the ethanol blending in India now we're also going to look at what is happening in India who are the beneficiaries what is the current price what is the production capacity what is the future production we're also going to look at what government is doing to help people right incentivize them incentivize the manufacturers to build more ethanol we're also going to see whether there's enough demand for the future. is there demand projections for the future and finally we're going to look at the top eight stocks that are there in the ethanol blending program in India we're gonna do some analysis on that

Why ethanol blending in fuel is so important to India

The main purpose for the promotion of industrial ethanol is for its use in blending for petrol and to promote the usage of biofuels it is mostly used in blending currently 98% of the demand from the road transport sector is met by fossil fuels and only 2%is met by biofuels as per PPAC. India imports 85% of its oil demand, that's bad because we're importing it from other nations so we will incur a loss this is a big strain on not only the country's entire economy but also on its foreign reserves because now we are open to foreign exchange risk it also makes the Indian economy very vulnerable to oil price risk, if oil price goes up we have to start importing at a very high cost and this is 85% of the oil demand import which is not good India should have more in-house now domestic biofuels to provide a strategic opportunity to India they reduce the nation's dependence on the import of fossil fuels, If India's domestic production goes up and also they are very environmentally friendly as well right because they have lower carbon emissions than pure fossil fuels so biofuels are very important from that perspective now the common solution that helps is to reduce the dependence on oil imports and promote the local companies and the farming sector, ethanol blending is not something new and has already been implemented in major countries like USA, China Brazil and Thailand so this is why ethanol blending is so important to India mainly because it will reduce that 85% of the import that it does from oils. Let's look at another thing the environmental gains from the use of ethanol because we said in the past right we looked at it that if it was pure fuel the carbon emissions that come out are slightly higher but if ethanol is blended into the fossil fuel then the emissions are slightly lower there are big environmental gains to be had from switching to ethanol blended into petrol carbon monoxide emissions have seemed to have been seen to have dropped.

stocks that benefit from ethanol blending

1. Renuka Sugars

It is one of the largest sugar manufacturers in India with their brand Madhur which is around 32% market share is what they own in the sugar industry. It is based out of Maharashtra and has an existing ethanol blending capacity of 720 KLPD (kiloliters per day), which is around 6% of the total ethanol capacity in India which is quite significant. It will bring the total capacity to 1400 KLPD by October 2022.

2. Balrampur Chini mills

It is one of the largest sugar-based manufacturers they are based in Uttar Pradesh they have derived around 15% of the sales and 50% of their EBIT from ethanol in 2021. it has a current ethanol blending capacity of 4.5% of the industry capacity at 520 KLPDit is also planning to increase the capacity to 840 KLPD by December 2022.

3. EID Parry

Eid parry was founded in 1788 it is one of the oldest sugar companies in India with over 225 years of operation it is a part of the Murugappa Group and has operations in Tamil Nadu Karnataka and Andhra Pradesh it also owns Coromandel international which is one of the leading fertilizer companies in India it is derived approximately 15% of their sales from ethanol and 15 EBIT from ethanol in 2021 now parry has an ethanol capacity of 234 KLPD which is currently 2% of the entire industry capacity but this also even they're planning to increase the capacity to another 150 KLPD with new distilleries coming up.

4. Triveni engineering

Triveni engineering is a conglomerate across different segments which is an agriculture sugar alcohol and power co-generation and engineering which is water and water management and even power transmission. they're based out of up which is Uttar Pradesh now it is derived around it currently has an ethanol capacity of 320 kiloliters per day which is approximately 2.76% of the industry capacity and it's planning to increase totally another 200 they're planning to do by 2022 next year so even they'll have a lot of increase in ethanol capacity.

5. Dalmia Bharat sugar

Dalmia Bharat is based in Uttar Pradesh and it is a preferred sugar supplier to institutional giants such as coca-cola, Pepsi, Britannia, and many alcohol majors like united breweries now it has derived 16% of its sales and 42% of its EBIT from ethanol it's current ethanol capacities are 240 KLPD which is around 2% of the entire industry capacity but now it's planning to double its capacity by approximately Jan 2022.

6. Praj Industries

Praj is again a global supplier of sustainable solutions for bioenergy high purified water critical process equipment breweries and industrial wastewater management now it has over 750 customers over 75 different countries now their bioenergy operations are involved in setting up plants to make ethanol and other products like bio CNG for fuel use the company has an order book of 1748 crores with 85% domestic orders and 64% of those orders involved bioenergy they have derived 68% of their sales in FY 21 only from bioenergy segment

7. ISGEC heavy engineering

It's an engineering company which works around heavy plant engineering including sugar plants and ethanol distilleries around 30% of their sales are derived from sugar and around 13% of their order book around 6700 crores is from the sugar industry so this is again if this ethanol program goes up these guys will benefit a lot because 88% of the orders that they were getting are from domestic players itself

8. Globus spirits

Globus spirits is the largest manufacturer of bulk alcohol and extra neutral alcohol also known as ENA it sells IMIL which is known as Indian made Indian liquor and they also sell Indian made foreign liquor IMFL and they also do bulk alcohol for hand sanitizer franchise bottling their current capacity for ethanol is 500-kilo liters per day which are 4% of the entire industry capacity quite high around 55% of their capacity current capacity is used for bulk alcohol now they're planning to expand their current KLPD from 500 to another 420 more.