India and Ethanol

Jonathan Kingsman, a Paris based broker and MD of Societe J Kingsman is talking about the future of India in ethanol production. The firm concentrates on the sugar industry with a reputation in “physical brokerage, premium reporting, market analysis and price prediction”. They are also covering Ethanol due to its interplay with Sugar.

Bio-fuels are suddenly fashionable. Does ethanol have a future in India?

I believe more than Brazil, it is India that has a future in ethanol, mainly because it is derived from a by-product, molasses, instead of cane juice. In Brazil, ethanol is part of a debate whether the country should use sucrose, which is in demand, to make food or as a fuel. In India that debate is irrelevant.

In fact, as India’s sugar production increases, the output of molasses will increase too. Instead of dumping that in the world market, it would be more profitable to make ethanol out of it.

The entire interview is worth a read however, I want to concentrate here on the raw material used to create ethanol. Ethanol has many benefits. As Jonathan suggests:

They are Green, farmer-friendly, appeal to every politician’s desire to reduce import dependency, allow governments to give subsidy to growers of oilseeds and sugarcane, and generate industrial investment. All this makes bio-fuels very palatable to everyone across the political and economic spectrum.

However, they could be a bigger risk.

Oil is fungible. It can come from any origin and the only risk is price. Bio-fuels are agri-produce, dictated by weather and crop cycles. So the risks of short supply and price swings are much higher. Yet so many countries are now pushing bio-fuels!

Another problem is the food-fuel debate. Brazil produces its ethanol from a cane and in the US it is from Corn. Both have the additional problem of hurting the food supply markets. I had written much about this before. You can check them out here, here (bio fuels and water) and here (bio fuels and forests) and here (bio fuels and food).

In India, it can be produced from a by-product of sugar, Molasses and hence, depending on the local sugar production ethanol’s raw material may be less of an issue than other areas. The water issue still remains. However, this could be an area to watch.


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