India is quietly undergoing an energy revolution, one that is not only helping the country reduce its dependence on imported oil but is also opening up more opportunities for farmers and the rural economy. The rapid rise in ethanol production capacity is at the heart of this change, and its benefits are beginning to show across the nation.
More than a decade ago, in 2013, India’s ethanol capacity was only 421 crore litres. Today, that number has soared to 1,810 crore litres. This growth is the result of strong government policies and a clear national commitment to cleaner, greener fuels. Of the current capacity, 816 crore litres come from molasses, 858 crore litres from grains, and 136 crore litres from dual-feed plants.
This expansion is not just about numbers. To meet the government’s ambitious target of blending 20% ethanol with petrol by the Ethanol Supply Year 2025-26, India needs about 1,350 crore litres of ethanol for blending and industrial use. With the current capacity, and assuming plants run at 80% efficiency, we are well on track. India’s ethanol blending achievements have already exceeded expectations, with May 2025 recording 19.8 per cent ethanol blending in petrol. India blended 95.1 crore litres in May 2025 alone, contributing to a total of 572.1 crore litres from November 2024 to May 2025. The average blending rate of 18.8 per cent for this period shows India’s rapid progress toward the 20 per cent target.
This success becomes even more remarkable when considering the program’s evolution from just 1.53 per cent blending in 2013-14 to current levels. The trend shows that India is not just meeting its green fuel goals but is taking steps to position itself as one of the global leaders in sustainable energy.
For millions of Indian farmers, this ethanol boom is a game-changer. By creating a reliable market for crops like sugarcane and maize, ethanol production helps farmers get better prices and timely payments. Maize farmers in many states are also seeing higher returns, as more of their crop is now being used for ethanol. At the same time, the government should also consider the concerns of ethanol producers, who say their production costs are high. There is a need to review ethanol prices, as an increase could help ensure more prompt payments to farmers and better price.
The ethanol industry is not just about farmers and biofuel producers, it is also creating jobs and boosting rural economies. New distilleries and related infrastructure mean more employment opportunities, from construction to transport and plant operations. The industry has become a significant job generator, creating both direct and indirect opportunities. As per the data, each crore litre of ethanol production generates about 290 direct jobs and 1,280 indirect jobs across the agricultural value chain.
As the industry grows, it brings much-needed development to rural areas, helping slow down migration to cities. Ethanol production facilities, usually located in rural areas, have driven regional development. The industry has created jobs not just in agriculture but also in transportation, storage, processing, and logistics. This multiplier effect strengthens rural economies and helps reduce urban migration.
Ethanol is a cleaner-burning fuel than petrol, which means less air pollution and lower carbon emissions. India’s ethanol blending programme has already helped reduce carbon emissions and saved the country over Rs. 1 lakh crore in foreign exchange by cutting oil imports. These benefits affect every citizen, not just those directly involved in the industry.
Despite these positives, there are challenges that need attention. The Union government has made a strong push to promote ethanol production as part of its green fuel mission. However, states like Haryana, Punjab, and Himachal Pradesh have levied fees on ethanol production in their excise policies, which is worrying ethanol producers. Such levies could disrupt the smooth operation of ethanol units and increase overall production costs. Steps need to be taken to align state excise policies with the Ministry of Petroleum and Natural Gas (MoPNG) recommendations and the best practices adopted by other leading ethanol-producing states.
Despite the advancements in ethanol production in country, there is still a need to focus on increasing ethanol consumption, especially in the transport sector. One suggestion from the industry is to align taxes on flex-fuel vehicles with those on electric vehicles, which currently attract a lower tax rate of 5 per cent. Supporters of this idea believe that such a move could encourage more people to adopt flex-fuel vehicles, helping to speed up the use of ethanol-blended petrol. This could further reduce India’s fuel bill and help lower emissions from the transportation sector. There is also need to reduce the GST on crude ethanol from 18 per cent to 5 per cent, which will help to boost the usage of it.
India’s ethanol production capacity expansion represents more than just an energy transition, it is a comprehensive development strategy that addresses energy security, environmental sustainability, agricultural prosperity, and rural employment. The success of this programme will depend on maintaining policy consistency and ensuring that all stakeholders, from farmers to state governments, remain aligned with the vision of a cleaner, more self-reliant energy future.
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