When the government envisioned fully implementing the Ethanol Blending Programme, the country had limited ethanol production capacity, mainly from a few sugar mills.
The logical next step was to increase ethanol production within the nation.
The government announced an interest subvention scheme to support ethanol distillation units and introduced differential ethanol procurement prices based on feedstocks to incentivise producers.
From 38 crore litres in ESY 2013–14, the installed capacity for ethanol production has increased to over 1,990 crore litres as of November 2025.
However, ethanol suppliers are concerned, as actual ethanol lifting remains low compared to the installed capacity, leading to underutilisation.
Industry bodies have communicated their concerns to the government, urging an increase in ethanol utilisation and demand.
Recently, the West Indian Sugar Mills Association (WISMA) wrote to the Prime Minister regarding this issue. They highlighted the current ethanol season’s allocation by Oil Marketing Companies (OMCs), noting that the OMCs’ allocation for ESY 2025-26 is about 1,048 crore litres, leaving a significant amount of ethanol production capacity unutilised.
“Underutilisation has already begun to create acute financial pressures for sugar mills and distilleries, resulting in delayed payments to farmers, stranded investments of over 18,000 crores, weakening rural incomes, and the possibility of increased NPAs in the banking sector. Without an alternative demand mechanism, the country risks over 5 crore sugarcane dependent families at risk,” the letter mentioned.
I feel the issue may be gradually developing into a more significant challenge. It is urgent that every drop of ethanol produced from the installed units be absorbed, and thus, a roadmap for ethanol utilisation is outlined below:
Higher ethanol blending targets: The country successfully achieved 20% ethanol blending five years early, and reaching even higher targets is within the capabilities of ethanol producers and suppliers of this green fuel.
However, clear policies are needed to achieve this. The government should set higher blending targets (22%, 25%, or 27%) and direct regulatory bodies to set standards for them.
This will not only reaffirm the government’s commitment to the programme but also help utilise surplus ethanol capacity and unlock its potential.
Introduction of FFVs: This has been discussed on various platforms. The government should develop a roadmap for rolling out Flex-Fuel Vehicles (FFVs) on Indian roads. A favourable tax regime would facilitate easier adoption. OEMs have also expressed their willingness to modify vehicles for higher blends.
RS and ENA from 1G plants: WISMA highlighted this in its letter to the Prime Minister. Existing ethanol units should be permitted to produce Rectified Spirit (RS) and Extra Neutral Alcohol (ENA). The government should consider allowing exports of ethanol, especially to countries with deficits. This could unlock 100-150 crore litres for global markets and offer immediate relief to manufacturers.
Increasing use of Isobutanol: Isobutanol, produced from the same feedstocks as molasses-based ethanol, has various applications. Its blending with diesel has the potential to produce cleaner, lower-carbon diesel fuels and helps broaden the green fuel portfolio. Recently, WISMA highlighted that since ethanol cannot be mixed with diesel directly as ethanol in gasoline due to phase separation, existing as is ethanol cannot be used for diesel blending. Global research and studies conducted by CSIR-IIP demonstrate that isobutanol is a far better option because it mixes perfectly with diesel without phase separation, exhibits a higher cetane number than ethanol, offers substantially higher energy density, handles water better, and displays improved cold-weather performance.
The Ethanol Blending Programme’s goals include reducing vehicle emissions, lowering crude imports, and increasing income for sugarcane and grain farmers.
However, if ethanol production capacity exceeds demand, manufacturers will face losses from underutilised capacities.
Historically, the sugar industry faced a ‘problem of plenty,” when surplus sugar and weak demand led to multi-year depressed prices. Mills struggled financially, making it difficult to pay farmers.
This situation must be avoided at all costs.
The government should respond to the plea of ethanol manufacturers by announcing a comprehensive Roadmap for Ethanol Demand Creation, to protect the interests of both manufacturers and farmers.
Also read: WISMA urges launching of pilot projects for E25 and E30 in states with surplus ethanol capacity
For further inquiries or to contact Uppal Shah, Editor-in-Chief, please send an email to Uppal@chinimandi.com.
