E85 fuel adoption could boost India’s ethanol demand by 21%, strengthening biofuel growth
India could increase annual ethanol demand by 21% by fiscal 2040 through adoption of E85-compatible vehicles, according to InCred Research. Ethanol demand may reach 29.63 billion litres, boosting sugar and grain-based ethanol industries while supporting cleaner transport and lower crude oil imports.
India’s push towards E85-compatible vehicles could significantly expand the country’s ethanol market, with annual demand projected to rise by nearly 21 per cent by fiscal 2040 compared with an E20-only scenario, according to a report by InCred Research.
The report suggests that the government’s focus on E85 fuel marks the first major step beyond the existing E20 ethanol blending programme and could create a new wave of demand for the biofuel over the next decade, Business World reported.
India has already built substantial ethanol production capacity to support the E20 target, while automobile manufacturers have developed flex-fuel vehicle technology capable of running on higher ethanol blends. The shift is also aligned with the country’s broader goals of reducing crude oil imports and strengthening agricultural value chains.
According to InCred Research, total ethanol demand could increase from 13 billion litres in fiscal 2026 to 29.63 billion litres by fiscal 2040 if E85 adoption gains momentum. In comparison, ethanol demand under an E20-only framework is projected to reach 25.74 billion litres during the same period.
This would create additional annual ethanol demand of 3.89 billion litres by fiscal 2040, representing a 21 per cent increase over the base-case scenario.
The projections assume petrol consumption growth of 5 per cent annually and estimate that flex-fuel vehicles will account for 50 per cent of new petrol vehicle sales between fiscal 2036 and fiscal 2040.
While the impact is expected to be modest in the initial years, demand is projected to accelerate as flex-fuel vehicles become more common. Ethanol demand is estimated to rise from 15.80 billion litres under the E20 scenario to 16.04 billion litres by fiscal 2030, with the gap widening significantly thereafter.
According to the report, flex-fuel vehicle penetration could increase from just 1 per cent in fiscal 2027 to 50 per cent by fiscal 2036, remaining at that level through fiscal 2040.
By then, E85 fuel alone could account for nearly 6 billion litres of annual ethanol demand, helping raise India’s overall ethanol blending rate to around 23 per cent, compared with the current E20 framework.
The report noted that the development could create fresh opportunities for India’s sugar and grain-based ethanol industries, providing an additional growth avenue beyond existing blending targets.
However, InCred Research cautioned that several uncertainties remain. Key factors include the availability of fiscal incentives for flex-fuel vehicles, consumer acceptance of potentially lower fuel efficiency from higher ethanol blends, and the willingness of automobile manufacturers to actively market flex-fuel models rather than treating them primarily as compliance products.
The report also highlighted uncertainty over whether E85 will remain a niche segment or emerge as a mainstream fuel option in India’s transportation sector.
Despite these challenges, the brokerage pointed out that India’s successful implementation of the E20 programme demonstrates the country’s ability to achieve ambitious ethanol targets faster than many initially expected.
InCred Research believes larger ethanol producers with established operations and expansion capabilities stand to benefit the most if E85 demand materialises. The report maintained a positive outlook on companies such as BCL Industries, Gulshan Polyols and TruAlt Bioenergy, citing their processing capacity, feedstock sourcing strengths and ability to scale production.
According to the report, the emergence of E85 could create a new growth chapter for India’s biofuel sector, supporting ethanol producers, strengthening agricultural markets and accelerating the country’s transition towards cleaner transportation fuels.
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Source : ChiniMandi
