Oil Costs Spur India To Produce Ethanol From Farm Waste

India opened its first factory to produce ethanol from rice straw or stubble on Wednesday as part of measures to reduce its reliance on oil imports and meet its net zero carbon goal.

Prime Minister Narendra Modi said the project will help cut pollution in India's capital New Delhi, which has been blanketed by smog from stubble burning in recent winters, as well as in the northern states of Haryana and Punjab.

India, one of the world's biggest emitter of greenhouse gases, has set a 2070 goal for net zero carbon emissions and has expedited steps to switch to cleaner energy to cut projected emission by a billion tonnes by 2030.

Modi said India, the world's third biggest oil importer, could not remain insulated from disruption in global markets, adding that the Panipat project would boost farmers' incomes.

A combination of oil prices rising well above $100 per barrel and a strong U.S. dollar have piled pressure on countries which are dependent on crude imports to drive their economies.

Indian state-run oil firms have announced plans for 12 plants in several states to produce ethanol using farm waste.

Commercial production from the new 9 billion Indian rupee ($114 million) Indian Oil Corp plant would begin in three months, India's oil minister Hardeep Singh Puri said.

He said India is the third country after Brazil and the United States to produce ethanol from agricultural waste.

The plant will generate 100 kilolitres of ethanol a day, equivalent to about 100 tonnes. India has until now used ethanol produced from sugar for mixing with gasoline. Ethanol produced from the project will help cut annual carbon emissions by about 300,000 tonnes, equivalent to taking nearly 63,000 cars off India's roads a year, Sukla Mistry, head of refineries at Indian Oil, said.

India rely on foreign oil suppliers for about 85% of demand, but in the last eight years it has raised the percentage of ethanol in gasoline to 10.16% from 1.4%.

The government aims to raise this mix to 20% by 2025/26.

India's gasoline demand is rising rapidly as people opt to travel in their own vehicles to avoid a heatwave.

"We have saved foreign exchange outgo of 415 billion rupees through blending of ethanol with gasoline and reduced about 2.7 million tonnes of carbon dioxide emissions," Puri said. Apart from financial savings, the new plant will also help in disposing of rice crop-waste, which is a major source of air pollution when farmers burn stubble. The new plant will use 200,000 tonnes of rice straw.

($1 = 79.2450 Indian rupees)