Page 174 - CW E-Magazine (13-5-2025)

Special Report

Why Indian methanol producers will miss

the “Methanol Economy” bus

The value proposition of methanol Current market scenario SAPTARAG HOTA
ethanol serves as a versatile Domestic methanol consumption Consultant, Avalon Consulting
solvent, a fundamental build- has grown from 1.8-mt (million metric
Ming block for various chemi- tonnes) in FY17 to 2.8-mt in FY23, ning a methanol-producing facility will
cals, and an alternative fuel source. The registering a CAGR of 9%. At the same further erode the profi tability of the
Indian government’s initiative to pro- time, domestic methanol production domestic producers. This is evident
mote cleaner fuels aims to reduce the was 0.18-mt in FY17 and decreased from the fact that Gujarat Narmada
rising import bill and greenhouse gas to 0.07-mt in FY23, indicating ~95% Fertiliser and Chemicals (GNFC), one
emissions, making methanol increa- of domestic consumption, during this of India’s major producers of methanol,
singly commercially attractive. While period, was fulfi lled by imports. The shut its methanol plants in FY24 due to
ethanol has gained signifi cant traction installed methanol production capa- unfavourable cost economics.
through the Ethanol Blending Program city has remained stagnant at 0.47-mtpa,
(EBP), which targets a 20% blending with a paltry capacity utilization of An argument can be made for the
with gasoline by 2025, it faces chal- 14% in FY23. domestic producers to raise their prices, but
lenges that could hinder its widespread approximately 75% of methanol imported
adoption. Ethanol production primarily What explains this predicament of to India comes from the producers in the
relies on sugarcane or foodgrains like domestic methanol producers? Gulf countries, who possess pricing power
rice, raising concerns about food secu- It boils down to the choice of feed- due to either the availability of cheap natu-
rity and resource allocation, as exten- stock. Methanol can be produced from ral gas or captive production of natural
sive cultivation of a land and water- feedstocks such as natural gas, naphtha, gas. Hence, operations of the domestic
intensive crop like sugarcane may coal, and biomass. Domestic producers methanol plants will remain intermittent
divert resources from food production. rely on natural gas as a feedstock since depending on the price of natural gas.
Additionally, the reduction of the Goods the production technology is mature
and Services Tax (GST) on ethanol and can produce methanol with attrac- Biomass as a feedstock
from 18% to 5% presents a challenge tive unit economics when operated at Biomass is an alternate feedstock to
by resulting in substantial foregone tax scale. A methanol plant using natural produce methanol. Its source – forestry &
revenues for the government. gas as a feedstock will require around agricultural waste, landfi lls, and municipal
28-31 million British Thermal Units solid waste (MSW) – makes it the only
In contrast, methanol and dimethyl (MMBTU) of natural gas to produce feedstock that can be used to produce
ether (DME) present promising alter- a tonne of methanol. Domestic natural renewable methanol.
natives for blending with petrol and gas prices have hovered around the $8/
diesel. Methanol can be blended with MMBTU mark while domestic meth- However, the adoption of biomass as a
gasoline at varying ratios, enhancing anol prices have remained around feedstock is beset with challenges, such as
octane ratings while reducing emis- Rs. 25/litre. Hence, domestic produc- a fragmented supply chain and high pro-
sions. Similarly, DME can be used as ers’ contribution over raw material is a duction costs.
a clean substitute for diesel, offering meagre Rs. 6 per tonne of methanol.
signifi cant reductions in particulate To begin with, the supply of biomass is
matter and greenhouse gas emissions. Moreover, of the natural gas con- highly fragmented. Securing large quanti-
The blending potential of methanol and sumed in India roughly 50% is imported, ties of biomass from fragmented sources
DME not only addresses the challenges which could lead to further erosion of supply will pose a signifi cant logistical
faced by ethanol but also aligns with of contribution over raw material of challenge, leading to high inbound freight
India’s goals for energy security and the domestic producers due to higher costs, higher raw material inventory days,
sustainability. By investing in a metha- landed cost of imported natural gas owing and high operational risk in case supply is
nol economy, India can capitalize on to transportation, storage, and hand- disrupted.
its domestic resources while fostering ling of natural gas in liquifi ed form.
innovation in cleaner fuel technologies. Additionally, the fi xed costs of run- Secondly, the production of methanol

174 Chemical Weekly May 13, 2025

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