Ethanol blending push beyond E20 faces capacity constraints, industry sees E30 as realistic near-term goal
India’s push beyond 20% ethanol blending faces capacity constraints, with current infrastructure insufficient for higher targets like E85. Experts see 30% as a realistic near-term goal, requiring policy support and feedstock growth, while balancing fuel expansion with food security and sugar supply concerns.
India’s ambition to push ethanol blending well beyond the 20 per cent mark will run into significant capacity constraints unless production infrastructure expands sharply, industry experts told CNBC TV18.
Atul Chaturvedi, former Executive Chairman of Shree Renuka Sugars, acknowledged that the broader direction of policy is sound but cautioned that the arithmetic of a rapid scale-up does not yet hold. “India consumes roughly about 5,000 crore litres of petrol… at 85% it would work out to something like 42.5 billion litres… and I don’t think India has the capacity at this point of time,” he said.
The government is understood to be considering allowing testing of fuel blends ranging from E85 to E100 and has already held discussions with automakers to evaluate vehicle compatibility with such blends. However, industry insiders said the more credible near-term target is a move to 30 per cent blending over the next few years, which would itself push existing capacity limits and require a steady build-up of feedstock from sugarcane and grains.
Analysts noted that the transition would also be contingent on supportive policy measures, including fiscal incentives for flex-fuel vehicles and a potential reduction in the goods and services tax applicable to such vehicles and related equipment.
From a market standpoint, the ethanol trajectory continues to be viewed as a positive catalyst for sugar sector companies. Prashant Biyani of Elara Securities said that a meaningful increase in blending targets would deliver broad-based gains across the industry. “All companies who are into sugar-based ethanol or green ethanol will benefit… there will be volume uptick from everyone,” he said.
Biyani and other analysts noted, however, that there is no immediate pressure on companies to rush into fresh capacity creation. The sector currently holds some spare capacity that can absorb incremental demand in the early stages of a blending ramp-up, with new capital investments expected to materialise only after blending levels have been sustained at higher rates for a few years.
Among individual companies, Elara Securities identified Balrampur Chini Mills as a preferred pick within the sector, citing its diversified revenue base, established ethanol operations, and its foray into bioplastics through polylactic acid (PLA) production as factors that could support longer-term growth.
Underlying the entire debate, analysts said, is the structural challenge of balancing food and fuel demands. As ethanol diversion from sugar rises, concerns over domestic sugar availability and price stability are likely to resurface. The push for higher blending, however, remains tightly linked to India’s broader energy security objectives, particularly given the continued uncertainty in global energy markets.
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Source : ChiniMandi
