India's ethanol narrative has been around the fuel pump for the past 10 years blending data, mileage calculation arguments and calculations of forex savings at petroleum ministry press briefings. Now that story is going inside and into the kitchen and India's fears about energy security are at stake as much as its aspirations of biofuels.

The government is developing a policy framework which will be finalised around September which will formally introduce ethanol as a cooking fuel for households. The concept had been floating around in industry circles for months, but the urgency this time is because it's finally happening. The idea is to develop a complete supply chain, including subsidies for ethanol stoves, safety certification for a fuel that no one has used on a large scale before, and a retail chain to put it in households, executives briefed on the matter said. The most striking element of that network the so called ethanol ATMs the dispensing kiosks at existing petrol pump stations where households will refuel the same way they refuel cooking gas cylinders. The oil marketing firms are already looking out for opportunities to tie up in ethanol-stove technology deals and acquisitions, instead of developing from scratch.

All of this is not occurring in isolation. The immediate culprit, according to those who were involved in the talks, was the disruptions in global shipping in West Asia over the past few weeks, with the Strait of Hormuz being the route used for the majority of LPG imports from the Gulf supplies into India. India has been keeping some strategic buffer of cooking gas for around one month and has been diversifying its sources for years, but the episode seems to have made it very clear that the use of a gas produced in India to balance the imported cooking gas is no longer a choice for the ministry. A point to note is that India continues to import much crude and a significant proportion of LPG, and any measure that will decrease this importation has an economic sense beyond the kitchen.

The reality of ethanol as cooking fuel that will render it a plausible option rather than an aspirational option is a real supply glut. According to CareEdge Ratings, India's ethanol production capacity has exceeded 20 billion litres per year and another 4 billion litres are likely to come online this financial year. That includes about 11 billion litres that are used for the E20 petrol-blending requirement, plus 3 to 3.5 billion litres used by liquor distillers, pharmaceutical companies and chemical factories. That leaves nearly 7 billion litres of capacity sitting idle and increasing faster than the blending programme could consume it in part because the sugar cane and grain refiners expanded on the back of the government-guaranteed procurement prices of the three large state refiners. Cooking fuel provides that idle capacity with a home. The other path that is under consideration is exporting it to Nepal, Bangladesh and Indonesia, all of which have their own blending targets without the distilling ability to reach them; and the two ways are not mutually exclusive.

The economics of the broader ethanol push are already large enough to have an impact on anyone watching the rural and energy accounts in India. Since 2014-15, the exchequer has saved over ₹1.4 lakh crore on foreign exchange due to blending, which has resulted in the reduction of crude substitution by approximately 245 lakh metric tonnes and compensation for farmers at a rate of tens of thousands of crores per year for blending feedstock. If the blending is done at its full rate of 20 per cent, payments to cane and grain farmers this year alone will reach ₹40,000 crore and forex savings will be nearly ₹43,000 crore. Union minister Nitin Gadkari has said that the ethanol economy should be scaled up to ₹2 lakh crore within five years from the current covering of about ₹22,000 crore, and separately showed a prototype cooking stove that runs on ethanol mixed with water, which it could beat commercial LPG cylinder pricing, too. The broader ethanol market in India is expected to reach close to $11.8 billion by the early 2030s, with the compound growth rate of around 14 percent driven more by a legal obligation for India's biggest refiners to continue buying, according to independent market estimates.

It's at that point that the sceptics enter, and their inquiries are by no means straightforward. The engineering and liability issues involved in installing a fuel network that is designed to safely dispense a flammable fuel such as alcohol in unsupervised homes are quite different from those that face the blending process at the refinery gate. Ethanol blending for vehicles has not been bed of roses: ethanol-rich E20 fuel has actually been found to reduce fuel efficiency in government-commissioned tests, and various opposition groups have raised concerns about potential conflicts of interest on the part of the road transport ministry, owing to its close links with family-run ethanol producers, a claim the government has denied. Whether or not a house stove economy can be sustained without just having the LPG subsidy bill shifted onto ethanol producers is an open question the September framework will have to address with real numbers, not capacity charts. Industry sources monitoring the industry warn that the successful implementation of the pilot project will depend on the logistics related to the movement of canisters and on the burner's safety certification, not just on a paper refinery level surplus.

India's shift towards ethanol as a transport and cooking fuel puts it clearly in the middle of the energy nationalism game, from US-driven corn ethanol exports to Brazil's flex-fuel dominance and the EU's biofuel sustainability controversy, as fewer nations have the supply of natural feedstocks that India does, and as now, India has a plan to close the loop between farm output and cooking fuel. That's an elastic loop, but for now the numbers don't seem to fall apart.