Distillery capacity utilisation across India is expected to remain under pressure this year as fresh production units come on stream, while ethanol procurement by state-run oil marketing companies is likely to see only marginal growth, The Economic Times reported.
Sanjay Khanna, interim chief executive of Bharat Petroleum Corporation (BPCL), said the sector is facing mounting pressure due to excess supply. He noted that ethanol availability has risen sharply, creating fresh challenges for the industry.
IndiaтАЩs current annual ethanol production capacity is around 18 billion litres. This is projected to increase to 21 billion litres once plants under construction become operational, Khanna said. He also serves as director of refineries at BPCL and holds additional charge as chairman.
Government-owned fuel retailers тАФ Bharat Petroleum Corporation, Hindustan Petroleum Corporation Limited and Indian Oil Corporation тАФ procure ethanol for 20% blending with petrol. In the ethanol year that ended in October 2025, oil companies blended about 11 billion litres of ethanol.
For the current ethanol year that began in November, demand is expected to be between 11 billion and 12 billion litres, based on growth in petrol consumption. Petrol sales have risen by around 6% in the current financial year. If this pace continues, ethanol demand will grow at a similar rate, which is much slower than the increase in production capacity.
Oil companies plan to source ethanol from both older units and newly commissioned distilleries. As new supply enters the system, older plants may see lower capacity utilisation. Producers have been urging oil firms to increase offtake, but companies have limited scope to raise purchases. The 20% blending requirement sets a ceiling on how much ethanol can be absorbed.
Discussions among policymakers about raising the blending target slowed last year following criticism on social media about possible damage to vehicles not designed for higher ethanol blends. Although the government dismissed the concerns, it has not taken further steps to increase the blending limit.
Motorists have also sought a price reduction for ethanol-blended petrol, pointing out that ethanol contains about one-third less energy than pure petrol. A 20% blend is estimated to lower fuel efficiency by roughly 6%. The oil ministry, however, rejected the demand in August, stating that ethanol costs more than petrol.
IndiaтАЩs ethanol blending programme aims to cut crude oil imports by replacing part of petrol with domestically produced biofuel. It is also intended to support sugarcane and maize farmers.
