India looks at ethanol exports as domestic capacity outpaces demand
India’s ethanol industry is seeking exports to Nepal, Bangladesh and Indonesia to ease a 7-billion-litre surplus caused by production outpacing domestic demand. Distillery utilisation has fallen to 60%, while exports of first-generation fuel ethanol remain restricted despite rising production capacity.
New Delhi/Mumbai: India’s ethanol industry is looking beyond domestic markets as production capacity continues to rise faster than demand, creating a surplus that industry players say could be partly addressed through exports.
According to industry representatives, India is considering exporting ethanol to neighbouring countries such as Nepal, Bangladesh and Indonesia, where 10% ethanol blending mandates have been introduced but domestic feedstock availability and distilling capacity remain limited, The Economic Times reported.
“We are seeking ethanol exports because that would help in the interim period to move out some surplus from the country,” said Bharti Balaji, Deputy Director General of the All India Distillers’ Association (AIDA). Balaji said countries including Nepal, Bangladesh and Indonesia have adopted 10% blending mandates, and exporting surplus ethanol would provide temporary support to distilleries.
India’s ethanol production capacity has crossed 20 billion litres annually, with another 4 billion litres expected to be added during the current financial year, according to a May report by CareEdge Ratings.
However, domestic demand has not kept pace. The government’s E20 blending programme consumes around 11 billion litres a year, while another 3-3.5 billion litres is used by non-fuel sectors such as liquor manufacturing, pharmaceuticals and chemicals. This leaves nearly 7 billion litres of production capacity without demand.
The imbalance has pushed distillery utilisation down to around 60%, with analysts expecting utilisation to remain between 65% and 75% over the next three years. Maharashtra, one of India’s largest ethanol-producing states, is expected to face the greatest impact from the surplus.
Not all ethanol produced in the country is used as fuel. About 18.7% of demand comes from undenatured ethanol used in Indian Made Foreign Liquor (IMFL), country liquor, pharmaceuticals and laboratories. The extra neutral alcohol (ENA) market reached nearly 3.8 billion litres in 2025 and is growing at about 5% annually, supported by consumers shifting from country liquor to IMFL.
Ethanol and ENA are also used in products such as antiseptics, vaccines, antibiotics, cosmetics, detergents and hand sanitisers, a segment that is expanding at an annual rate of 9-11%.
Despite the surplus, exports of first-generation ethanol produced from sugarcane, maize or grain remain prohibited, according to the Grain Ethanol Manufacturers Association of India. Only second-generation ethanol produced from crop residue and biomass received export approval in September 2025.
India currently exports non-fuel-grade ethanol mainly to African countries including Tanzania, Angola and Kenya, along with smaller shipments to Iraq and Nepal. Nepal is also considering introducing a 10% ethanol blending mandate but currently lacks sufficient feedstock and distilling capacity. Industry discussions are also extending to other countries in the SAARC region.
Meanwhile, Praj Industries is focusing on bio-isobutanol as a new growth opportunity. Managing Director Ashish Gaikwad said the company’s bio-isobutanol (Bio-IBA) technology is ready for commercial production and expansion, with the first commercial order expected during the current quarter of FY27.
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Source : ChiniMandi
