Brazil’s Ethanol Technology: Resolving Sugar Dispute with India 2023
Brazil and India have long been prominent players in the global sugar industry, with both nations ranking among the top sugar producers worldwide.
However, in recent years, a sugar dispute has arisen between the two nations, primarily revolving around subsidies and export quotas.
In an effort to resolve this dispute and promote cooperation, Brazil has made a significant offer to India – sharing its advanced ethanol technology. This move could have far-reaching implications for both countries, as well as for the global sugar and ethanol industries.
According to a senior official, Brazil has offered its ethanol technology to help India keep a portion of its sugar output off the international market and settle the dispute at the World Trade Organisation (WTO) over how each nation handles its production of the commodity.
From October 1 to October 4, Commerce Secretary Sunil Barthwal travelled to Brazil for the 6th meeting of the India-Brazil Trade Monitoring Mechanism. During this meeting, discussions on the proposal for cooperation in the areas of renewable energy and biofuels were continued.
The plan for ethanol technology aligns nicely with the goal of the Indian government, which is to reduce reliance on imported oil and gradually raise the amount of ethanol blended with petroleum-based vehicle fuels.
Bazil has attained 25% blending levels and is a pioneer in petrol combined with ethanol. In Brazil, a sizable market for flex-fuel cars that can operate on either petrol or ethanol has already been cornered, accounting for 83% of sales of new light vehicles in 2022.
India wants to move from a current 12% ethanol blend to 20% by FY 26. Additionally, it is experimenting with ethanol and diesel blends. Every carmaker in the world produces vehicles with flex fuel engines, and as blending increases, these vehicle models may find their way into the Indian market.
The Indian government is pushing ethanol in order to increase agricultural revenue in addition to lowering the cost of importing crude oil for transportation and aiding in the decarbonization of transportation.
Some reports claim that ethanol can increase sugarcane growers’ revenue by 15%. Since ethanol generates extra revenue for farmers, there is less incentive to raise sugar prices. It also increases the sugarcane processors’ liquidity and profitability.
Brazil and India have been embroiled in several sugar-related WTO issues since India’s initial complaint, which was submitted in 2005, contested Brazil’s sugar subsidies. The Indians won this round.
Brazil contested India’s export subsidies and assistance programmes for sugarcane growers in 2019. According to Brazil, these actions were against the WTO’s Agreement on Agriculture (AoA).
An appeal was filed after the verdict in this matter went against India. Brazil has offered their ethanol in settlement of the dispute because the WTO’s Appellate Body is now non-operational.
With around $11 billion in sugar exports in 2022, Brazil leads the world, followed by India with approximately $5.7 billion. Both sides have criticised the other for the local support they give to their farmers, which they claim helps them undercut one another in the very competitive global sugar market.
The sugar dispute between Brazil and India has been ongoing for several years, with both nations accusing each other of providing subsidies that distort global sugar prices and hinder fair competition in the market.
India, as one of the world’s largest sugar producers, has been criticized for its sugar export subsidies, which Brazil claims have flooded the international market and driven down prices, negatively impacting Brazilian sugar exports.
In response, Brazil, the world’s largest producer and exporter of ethanol made from sugarcane, has sought ways to counter the impact of India’s sugar exports. This led to Brazil exploring the possibility of exporting more ethanol, as it is considered a valuable alternative to sugar in the global market.
Brazil’s ethanol production relies heavily on sugarcane, and the country is renowned for its advanced technology and expertise in this field.
In a bold move to address the sugar dispute and strengthen bilateral ties, Brazil has offered to share its advanced ethanol technology with India. This technology encompasses the entire ethanol production process, from cultivating sugarcane to the distillation and conversion into ethanol.
Brazil’s well-developed expertise in sugarcane cultivation, ethanol production, and infrastructure could significantly benefit India’s ethanol industry, which is still in the nascent stages compared to Brazil’s.
Key Aspects of the Ethanol Technology Offer:
- Sustainable Sugarcane Cultivation: Brazil’s expertise in sustainable sugarcane cultivation techniques could help India maximize yields while minimizing environmental impact. Sustainable practices can reduce water usage, pesticide application, and soil degradation.
- Advanced Ethanol Production: Brazil’s cutting-edge ethanol production processes could enhance the efficiency and quality of India’s ethanol production. This includes optimizing fermentation, distillation, and purification techniques.
- Infrastructure Development: Brazil has invested heavily in infrastructure to support its ethanol industry, such as ethanol refineries and transportation networks. Sharing this knowledge could help India develop a more robust ethanol ecosystem.
Benefits of the Offer
- Diversification of Revenue Streams: For India, adopting Brazil’s ethanol technology can help diversify revenue streams in the agriculture sector. Ethanol production is less susceptible to price fluctuations compared to sugar, providing more stable income for farmers and the industry.
- Reduced Environmental Impact: Ethanol is a cleaner-burning alternative to gasoline, contributing to reduced greenhouse gas emissions. Implementing Brazil’s sustainable cultivation practices could align India with global environmental goals.
- Trade Resolution: By accepting Brazil’s offer, India could potentially defuse the ongoing sugar dispute and promote healthier trade relations between the two countries.
- Energy Security: India’s ethanol industry can contribute to energy security by reducing dependence on fossil fuels. This aligns with the country’s efforts to increase the use of biofuels and reduce its carbon footprint.
The Brazil-India ethanol technology deal could have significant global implications:
- Ethanol Market Growth: A strengthened Indian ethanol industry could lead to increased global ethanol demand, driving growth in the biofuel market.
- Sugar Market Stability: If the offer helps resolve the sugar dispute, it could stabilize global sugar prices, benefiting both sugar producers and consumers.
- Environmental Impact: Wider adoption of ethanol as a cleaner alternative to gasoline can have a positive impact on global carbon emissions reduction goals.
Brazil’s offer to share its advanced ethanol technology with India is a promising step toward resolving the ongoing sugar dispute between the two countries. By accepting this offer, India can diversify its agricultural revenue streams, reduce its environmental footprint, and foster closer ties with Brazil.
Additionally, this collaboration has the potential to benefit the global ethanol market and contribute to environmental sustainability. The success of this technology transfer will depend on effective implementation and cooperation between the two nations, but it offers a path toward resolving trade disputes while promoting a greener future.
