India’s ethanol industry seeks new markets as nearly 7 billion litres of capacity remains surplus
India’s ethanol capacity has reached 20 billion litres, with another 4 billion litres expected this year, creating nearly 7 billion litres of potential surplus. E20 requires about 11 billion litres annually, while producers explore exports, non-fuel uses and bio-isobutanol for diesel blending.
New Delhi: India’s rapid expansion of ethanol production capacity has created a significant supply-demand mismatch, leaving nearly 7 billion litres of capacity without a clear market and prompting producers to explore new buyers and alternative applications, The Economic Times reported.
The country’s installed ethanol capacity has risen to around 20 billion litres, with another 4 billion litres expected to be added this year. However, the E20 blending programme requires about 11 billion litres annually, while non-fuel industries such as liquor, pharmaceuticals and chemicals consume another 3-3.5 billion litres.
As a result, ethanol producers are operating at only around 60% capacity. Industry officials expect utilisation to remain in the 65-75% range over the next three years. Maharashtra alone is estimated to face a surplus of around 2.77 billion litres.
For the 2025-26 ethanol supply year (November-October), suppliers had delivered 8.95 billion litres to oil marketing companies by August, against contracted volumes of around 10 billion litres.
The surplus situation has intensified the industry’s search for additional demand. The government has also put on hold any immediate move towards mandatory higher blending levels such as E25 or E30 following concerns raised by consumers over E20. The current roadmap remains capped at E20 until October 31, 2026, while the Centre has told the Supreme Court that the programme’s longer-term impact would become clearer only by 2027.
Ravindra Utgikar, chief sales officer at Wilo India, said India could consider differential pricing for different ethanol blends instead of mandating a uniform blend.
“Instead of mandating a single blend for all, we should move to differential pricing for different ethanol blends — E10, E20, E85,” Utgikar said. He noted that such an approach is being used in the US and Brazil and could allow vehicle owners to select fuel based on vehicle age, technology and compatibility while supporting wider ethanol adoption.
With domestic demand unable to absorb the growing production capacity, exports could provide only limited support. First-generation ethanol exports remain restricted, while India has permitted exports of second-generation ethanol since September 2025.
Small quantities of non-fuel ethanol are being shipped to markets such as Tanzania, Angola and Kenya. Meanwhile, the Grain Ethanol Manufacturers Association (GEMA) is discussing potential supplies to Nepal, which plans to introduce a 10% ethanol blending mandate but lacks adequate feedstock and distillation capacity.
The industry is also examining new applications beyond petrol blending. The government and ethanol producers are exploring the possibility of using ethanol-derived products for blending with diesel.
Ashish Gaikwad, managing director of Praj Industries, said the company’s bio-isobutanol technology was ready for commercialisation and scale-up, with the first order expected in the current quarter of FY27.
“With diesel demand far larger than petrol, bio-IBA blending could become a significant milestone in India’s biofuels journey,” Gaikwad said. He added that even a 2% bio-IBA blending mandate in diesel could create project opportunities worth more than Rs 3,000 crore.
Meanwhile, ethanol demand from non-fuel applications remains significant. Undenatured ethanol used by the liquor, pharmaceutical and laboratory sectors accounts for nearly 18.7% of overall demand.
The related extra neutral alcohol (ENA) market reached around 3.80 billion litres in 2025 and is growing at about 5% annually, supported by a shift in consumer preference from country liquor towards Indian-made foreign liquor (IMFL).
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Source : ChiniMandi
