Addressing the Current Scenario of Oversupply in the Indian Ethanol Industry – A Call for Immediate and Balanced Policy Action
Over the past five years, the Indian ethanol sector has undergone a remarkable transformation. From humble beginnings to a production capacity close to 1,700 crore litres, this growth story is a testament to India’s entrepreneurial spirit and the government’s sustained policy vision. Together, they have built a solid foundation for energy security, farmer prosperity and green growth.
The Ethanol Blending Program – A Nation Building Mission
The Ethanol Blending Program (EBP) is not just a fuel policy. It is a rural development and climate action initiative that touches all levels of the economy, from farmers and industries to the environment.
1. Economic impact
The EBP fundamentally reshaped India’s oil economy. What was once a foreign exchange outflow for crude imports is now a stable source of income for Indian farmers, transforming them into “Urjadaatas” (energy suppliers).
Between ESY 2014-15 and ESY 2024-25 (until July 2025):
• Ethanol blending by public sector OMCs saved ₹1,44,087 crore in foreign exchange.
• Crude oil substitution stands at 245 lakh metric tonnes.
• With 20% gender diversity, annual payments to farmers are expected to be ₹40,000 crore.
Private investments continue to flow into this sector, strengthening the vision of Atmanirbhar Bharat and boosting industrial growth.
2. Social and rural benefits
Each ethanol distillery is a rural employment center. It reduces migration, creates new entrepreneurs and connects agriculture to clean energy. Farmers benefit from reliable markets for sugarcane, corn, surplus grains and residues, ensuring stable incomes and reduced crop wastage.
3. Environmental gains
Ethanol burns cleaner, reducing CO₂ and particulate emissions by up to 50% compared to gasoline.
To date, the program has avoided 736 lakh tonnes of CO₂, which is equivalent to planting 30 crore trees. Beyond fuel, it promotes a circular economy by transforming agricultural waste into energy and biofertilizers while improving soil health.
The oversupply challenge: a transition phase, not a crisis
India’s success in achieving E20 blending ahead of schedule has placed it among the top three ethanol producers in the world. However, the current year has been marked by a temporary mismatch between supply and demand, leading to concerns over operational sustainability and pricing.
This imbalance does not concern the choice of raw materials, tendering standards or the location of factories. This is a short-term market distortion – the natural result of a rapidly growing sector that has outpaced current demand for blending.
What’s needed now is not a slowdown, but a recalibration of policies – measures that increase ethanol use and keep industry confidence intact.
From expansion to optimization
The story of ethanol in India has moved from the era of capacity creation to that of market optimization. The focus now needs to be on expanding the role of ethanol across all sectors – from transportation to energy, from blending to other industrial products.
Countries like Brazil and the United States already operate with ethanol blends of 27-30%, proving that a higher blend is both technically viable and economically viable.
In this light, oversupply is not a failure: it is a sign of maturity. The Indian ethanol industry is now poised to integrate deeper into the bioenergy ecosystem, well beyond oil substitution.
IFGE Policy Recommendations
To stabilize the market and support long-term growth, the Indian Green Energy Federation (IFGE) proposes the following measures:
1. Announce and implement the E27 roadmap:
Gradually increase the blending level up to 27%, which will absorb the entire current excess capacity and bring India in line with global leaders.
2. Ban imports of ethanol for industrial use (pharmaceutical, cosmetic, etc.):
With sufficient domestic capacity, imports should be limited to avoid market distortion and save foreign exchange, thereby unlocking over 100 crore liters of domestic opportunities.
3. Facilitated environmental authorization conditions (CE):
Allow ethanol sales beyond OMCs to private blenders, transportation companies, and institutional consumers, ensuring liquidity and broader market access.
4. Accelerated approvals of isobutanol-diesel blends:
Introduce new diesel blending options to open additional demand channels.
5. Accelerate the deployment of flex-fuel vehicles (FFV):
Force car manufacturers to produce E20-E85-E100 compatible vehicles on a large scale, thus guaranteeing long-term ethanol consumption and enabling clean mobility.
Conclusion
India’s ethanol journey reflects its vision, innovation and resilience. The current oversupply marks a turning point – not a crisis, but a moment to move from blending-centric policy to a comprehensive bioenergy strategy.
With timely policy action, diversified markets and continued public-private partnership, India can turn this temporary imbalance into a defining opportunity – reaffirming its position as a global leader in bioenergy, improving rural livelihoods and advancing its Net Zero 2070 goals.
(Sanjay Ganjoo is Director General of Indian Federation of Green Energy (IFGE))
(Amul Goel is co-chairman, IFGE-GEDA)
