India Builds 2,400-Crore-Litre Ethanol Capacity Amid Demand Gap
India’s ethanol production capacity has reached 2,000 crore litres, far exceeding current E20 blending demand, leading to underutilised capacity and regional supply imbalances. Limited multi-blend fuel infrastructure and storage remain major constraints, although ethanol demand is expected to grow steadily with rising adoption of flex-fuel vehicles by 2030.
India has scaled its ethanol capacity to 2000 crore litres, with an additional 400 crore litres expected to be operational by the Financial Year 2027. The demand under E20 blending is only nearly 1100 crore litres, with nonfuel demand of around 300-350 crore litres, leaving significant capacity unutilised, CareEdge said in a report.
This structural mismatch is reflected in allocation trends, with only 60% of offered ethanol being absorbed, indicating persistent utilisation pressures across the sector.
The ethanol ecosystem remains constrained by a single-grade retail network of 1.03 lakh outlets with the limited storage capacity of 77.8 crore litres, and reliance on over 300 centralised depots for blending and distribution.
This infrastructure is adequate for E20 rollout but not aligned with multi-blend requirements, thereby restricting the scalability of higher ethanol blends.
Ethanol has emerged as a globally preferred sustainable fuel, offering significant benefits in reducing greenhouse gas emissions, enhancing energy security, promoting agricultural demand, and supporting cleaner, renewable energy transitions across major economies worldwide.
As per the CareEdge report, the ethanol capacity addition is concentrated in select states including UP, Maharashtra, Karnataka, leading to regional surpluses ranging from 277 crore litres surplus in Maharashtra to 77 crore litres deficit in Tamil Nadu.
This creates dependence on long-distance transportation and supply redistribution, increasing logistics costs and affecting realisations even when aggregate national capacity is adequate.
CareEdge Ratings said the ethanol demand under the EBP programme to increase from current levels to reach approximately 1,200 crore litres in ESY 2026–27 and further to 1,600 crore litres by ESY 2029–30, driven by the gradual rollout of flex-fuel vehicles (FFVs) and the demand growth from the existing fleet of vehicles.
This projection assumes FFV penetration of ~5% of new vehicle sales by FY28, rising to 20% by FY30.
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Source : Times Now
