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Methanol Economy

NOV 15

Mains   > Economic Development   >   Indian Economy and issues   >   Unconventional gas Energy sources


  • Recently, India's first Indigenously Designed High Ash Coal Gasification Based Methanol Production Plant was inaugurated at BHEL R&D Centre, Hyderabad.


  • Methanol is a single carbon compound which can be produced from coal, natural gas, biomass (i.e. products which are capable of producing syngas)
  • It is light, volatile, colourless and flammable liquid with distinctive odour
  • It burns with invisible flame and is bio-degradable
  • It is highly toxic to humans if ingested
  • Dimethyl ether (DME) is the simplest ether compound can be produced from methanol or directly from syngas.
  • It is gaseous version of methanol and can be blended with LPG. It is a non-toxic compound


  • Ever-increasing demand for energy:
    • Energy is considered as of the key inputs for economic development of the country.
    • India is poised to play a significant role in the Global energy space, as it is likely to account for 25% of the rise in global energy demand by 2040
    • Our country’s energy demand is expected to rise at a compounded annual growth rate (CAGR) of 3.5% till 2040 as it advances on the path of development4
  • High import dependence:
    • India imported 37% of its total primary energy demand in 2015-16
    • Import dependence of crude oil and natural gas has increased from 73% and 17% in 2005-06 to 81% and 40% in 2015-16 respectively.
    • Methanol Economy will result in minimum 15% of reduction in fuel bill annually for the country by 2030
  • Dismal growth in domestic production of oil and gas:
    • There has been a dismal growth in domestic oil (CAGR –1.4%) and natural gas (0.01%) production over the last decade
  • Cleaner fuel:
    • Methanol is an efficient fuel (octane number 100) and emits lesser NOx and Particulate matter (PM) than gasoline and produces no SOx as there is no sulphur in methanol.
    • DME is also an efficient fuel and burns with lesser NOx and PM
  • Environmental issues:
    • India is the 3rd largest emitter of CO2 >> thus needs to switch to cleaner fuels to meet our INDC targets under Paris Agreement
  • Worsening air quality in Indian cities:
    • Methanol usage can bring down GHG emissions by 20% in terms of particulate matter, NOx, and SOx thereby improving urban air quality.
  • Coal availability:
    • China is leading the world with the largest production of Methanol & DME. China produces 70% of its methanol from Coal
    • India can also follow the footsteps of China as our country has the 5th largest coal reserves in the World
    • Weak global coal prices and stricter environmental laws are likely to offer firm coal to methanol margins


  • India is at a nascent stage in methanol production and usage, but it has a large potential given its wide applications
  • There are 5 main producers of methanol in India - Assam Petrochemicals, National Fertilizers Limited etc.
  • Domestic production of methanol has fallen by 57% from 2010-11 to 2015-16, whereas the consumption has risen by 61% over the same period
  • There has been continuous increase in methanol imports in India as they have more than doubled from 2010-11 to 2015-16
  • 90% of methanol requirement is met through imports. This is primarily because, it is cheaper for India to import methanol in comparison with domestic production.
  • India imports 99% of its methanol from Iran and Saudi Arabia, where methanol is produced from natural gas which is abundantly available in latter countries at extremely low prices


  • Methanol and DME to be used as a Transportation fuel:
    • Road sector:
      • Methanol & DME can be blended with gasoline and diesel, or can completely substitute the latter fuels respectively giving us an opportunity to reduce our dependence on imported crude oil.
      • India has already set itself an ambitious target of 10% reduction in import dependence of oil & gas by 2022
      • High methanol blends offer significant vehicle efficiency improvement – potential of 25%.
    • Railways:
      • This also offers an opportunity for the railway engines to run on methanol/DME blends.
    • Waterways:
      • India envisages to roll out a massive water transportation system under the aegis of its flagship Sagarmala project
      • In order to check the pollution caused by diesel run ships, methanol and DME powered ships would not only be cost effective alternatives but would also produce far less pollution.  
  • Help in achieving the objective of access to clean cooking fuels:
    • India houses nearly 800 million people without access to clean cooking fuels which largely rely on biomass to meet their cooking requirements.
    • Government launched an initiative, Pradhan Mantri Ujjwala Yojana (PMUY) in 2016 under which 5 Cr LPG connections will be distributed to Below Poverty Line (BPL) households
    • India imported 46% of its LPG requirements in 2015-16 and its imports are only going to rise in the near future.
    • Therefore, methanol or DME blending with LPG or the complete substitution of latter through former can not only gradually displace LPG imports, but would also help in enhancing the access to clean cooking fuels in India
  • Displacing diesel in Telecom Towers:
    • A large number of telecom towers, especially in rural areas run on diesel for as long as 18-20 hours a day because of frequent electric cuts.
    • Telecom towers in India consume around 2% of diesel consumption which is a significant amount indicating a vast potential for DME to replace diesel.
  • Production of various chemicals:
    • Methanol can be used for producing various chemicals like formaldehyde, acetic acid and olefins which can be exported and can be high foreign exchange earners
  • Dovetailing with Swachh Bharat Mission:
    • Apart from coal, biomass/Municipal Solid Waste (MSW) to methanol can also be a viable option for India which can be dovetailed with Swachh Bharat Mission.
    • The current availability of biomass in India is estimated to be in the range of 500-650 MT, however, a proper supply chain mechanism has to be created for the same so that there is a continuous availability of biomass for methanol production.
    • Moreover, it can be an opportunity for India to use its landfills to convert it into methanol and avoid problems such as toxins leaching into the soil and release of GHG emissions etc. 
  • Rising market:
    • The market for methanol is expected to register a CAGR of 5.64% during the forecast period (2019-2024).
    • One of the major factors driving the market studied is the increasing demand for methanol-based fuel.
  • Employment opportunities:
    • It can create close 5 million jobs through methanol production/application or distribution services


  • May not be financially attractive in the current scenario:
    • Investment in methanol/DME production might not look much attractive amidst the low global crude prices which have been a huge relief for India
  • Reliance on natural gas:
    • India relies on imported natural gas for methanol production due to which it loses its competitiveness in comparison with imports
  • Well to wheel (WTW) emissions:
    • The tailpipe emissions from methanol usage (i.e. at the consumption end) are quite low in comparison with conventional fuels like gasoline and diesel, however, the well to wheel (WTW) emissions for coal to methanol production in comparison with gasoline are more
  • Corrosive and highly toxic:
    • Methanol is more corrosive than gasoline and may require new equipment for storage and distribution of the same and is also toxic to humans if ingested


  • Task force constituted:
    • A task force has been constituted which would work towards the development of overall framework of Methanol production, distribution and utilization in the country.
  • Target based approach:
    • The Government is likely to go ahead with a target of 15% blending by methanol/DME in gasoline/diesel by 2022
  • Coal based methanol plant:
    • Coal India Limited (CIL) has unveiled its plan to set up a coal based methanol plant in West Bengal and has even invited bids from licensors of coal gasification technology to set up a coal to methanol plant
  • BIS has notified 20% DME blending with LPG:
    • To the consumer, it will result in saving of minimum Rs. 50 to Rs. 100 per cylinder.
  • Pollution free cooking medium
    • Assam petro-chemicals launched Asia’s first canisters based methanol cooking fuel programme
  • Methanol as marine fuel:
    • Cochin Shipyard had made 3 boats and 7 cargo vessels for Inland Waterways Authority of India (IWAI), that can run on methanol fuel
  • Railways:
    • In railways sector, RDSO is working towards blending of methanol in the range of 5-20% through direct fuel injection in locomotives.
  • International cooperation:
    • Under Indian Methanol Economy program 5 methanol plants based on high ash coal, 5 DME plants and 1 natural gas based methanol production plant in joint venture with Israel, are planned to be set up.
  • Private sector initiatives:
    • Methanol Institute, recently launched the India Methanol Economy Coalition (IMEC), a first of its kind coalition in India to promote the adoption of methanol as an energy product in India.
    • Methanol Institute (MI) serves as the global trade association for the methanol industry representing the world’s leading methanol producers, distributors and technology companies

SUGGESTIONS (as per NITI Aayog):

  • Use coal instead of natural gas for production of methanol:
    • Currently India is producing all of its methanol from imported natural gas, it must use coal for methanol production which is expected to make it economically viable to produce methanol in India
  • Waste to energy:
    • Apart from using coal as a feedstock, biomass/municipal solid waste and flared natural gas can also be used for methanol production, but the continuous availability of latter would be a challenge
    • Generate methanol from waste dumped in landfill, using gasification technology
  • Creation of an innovation fund:
    • The first and foremost step should be create an innovation fund that will support the R&D activities for methanol/DME in India.
  • State supported plant of coal to methanol production:
    • Establishment demonstration plant of coal to methanol production in India. (Coal India floats tender to build country's first coal to methanol (C2M) plant in West Bengal)
    • It is necessary to have a sufficient amount of methanol production capacity in India so that the user industries are assured of supply.
  • Promotion of flexi-fuel vehicles
    • Development of flexi-fuel vehicles which would be able to run on methanol/DME fuel blends
  • For cleaner cooking:
    • A separate program for the development of methanol/DME cook-stoves can be launched.
  • Reduce carbon emission in railways:
    • Program can be launched for converting diesel powered railway locomotives to methanol/DME based engines
  • International cooperation:
    • India should also look at options to set up a manufacturing facility for methanol/DME in Iran or Qatar as both these countries having huge reserves of natural gas can provide the same at very low prices.
    • Methanol/DME produced abroad can be imported in India for its direct application or for further conversion to chemicals like olefins.
    • Though, India may ending up importing methanol in the above scenario, it is likely to be economically advantageous rather than importing crude. 
  • Mega coal-based complex:
    • India must set up a mega coal based complex for production of power, methanol and fertilizer in an integrated manner which would significantly reduce the cost of various commodities produced. 


  • Chinese model:
    • Consumption of methanol in China has seen a rapid expansion at a CAGR of 18% over the last decade.
    • In 2016, China blended around 21 MT of methanol with gasoline, whereas India has not started using methanol as a transportation fuel.
    • Moreover, 90% of the total DME production in China goes into LPG blending, where DME is permitted as 20% blend on a weight basis
    • This shows that China has been aggressively pursuing the agenda of alternative fuels, especially using methanol to reduce its import dependence


  • India, with 125 Billion Tonnes of proven Coal reserves and 500 million tons of Biomass generated every year, has a huge potential for ensuring energy security based on Methanol.


Q. “Methanol and Dimethyl ether (DME) can play an important role in order to contain the rising imports and improve the energy security of India”. Discuss

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