The International Energy Agency (IEA) has released a report on India’s energy sector with title ‘India Bioenergy market Report’. The report is an outlook for liquid and gaseous biofuels by 2030.
This report examines the current supply and demand of liquid and gaseous biofuels in India and their forecasted growth to 2030. It provides a detailed assessment of existing policy and regulatory frameworks, feedstocks, production capacity, and identifies key considerations that may influence future development. It also outlines a set of policy priorities, drawing on international best practices, that India could consider to accelerate the deployment of liquid and gaseous biofuels in India.
India’s ethanol industry has emerged as one of the country’s most successful policy-driven energy stories.
As per the report, ethanol is forecast to grow by more than 35%, to over 15 billion litres per year (BLPY) by 2030. This assumes overall fuel demand continues to increase, with India maintaining its already achieved 20% blending target, and India’s suite of supportive policies and access to feedstocks for ethanol remain in place.
In an accelerated case, ethanol is forecast to grow by 45% to more than 16 BLPY by 2030. This assumes additional increases in overall fuel demand, greater deployment of flexible-fuel vehicles by 2030 due to India’s Production Linked Incentive, and a potential small blending increase to 21% to support the industry. Current ethanol production capacity is sufficient to support this, but would require facilities to operate at over 80% capacity. Any additional growth in ethanol demand beyond this would likely require additional investments in ethanol production capacity. Deployment of ethanol-compatible infrastructure would also likely need to increase, states the report.
Policy support for ethanol in India gained momentum in 2014 with the introduction of a revised ethanol pricing mechanism which provided stable and fixed prices for ethanol produced from sugar cane to improve cost-competitiveness and support scaling up of production. Building on this policy, India launched its NPB in 2018 to expand its domestic liquid biofuel industry and reduce reliance on crude oil imports for gasoline production. The NPB originally set a target of blending 20% ethanol in gasoline by 2030, which was later amended in 2022 to achieve this blending rate by 2025/26.
India developed several other policies in 2018 to support development of the ethanol supply chain and the targets set out under the NPB. These measures included financial support for new projects through the Scheme to Enhance Ethanol Distillation Capacity, which subsidises interest on loans used to retrofit existing facilities or develop new ethanol plants, as well as an expansion of eligible feedstocks to include heavy molasses, sugarcane juice and sugar, damaged food grains, maize, and surplus rice. In addition, India reduced the tax rate on ethanol used for blending from 18% to 5% to improve the cost-competitiveness.
In 2019, India launched the EBP Programme, originally a pilot and demonstration programme from 2001, to provide additional financial incentives to support mandated ethanol blending targets under the NPB while supporting feedstock suppliers. Under this programme, the government sets remunerative pricing for ethanol produced from feedstock based on sugar cane to support costcompetitiveness for ethanol producers. The OMCs provide long-term demand for ethanol by entering offtake agreements, of up to 10 years, with project developers and lenders.
India developed the Pradhan Mantri JI-VAN Yohana programme in the same year, later amended in 2024, to increase production of ethanol from a greater diversity of feedstocks. The programme provides USD 230 million (1 969.50 crore Indian rupees (INR)) of funding for the expansion of existing, or development of new, integrated ethanol projects using lignocellulosic biomass, non-edible food crops and waste-based feedstock. The programme has set a target to develop 10 demonstration-scale and 12 commercial-scale projects by 2028/29. The programme has so far provided over USD 100 million (INR 908.25 crore) for
six commercial and four demonstration plants.
In 2021, India created the Roadmap for Ethanol Blending in India 2020-25. The roadmap outlines annual measures to increase domestic ethanol supply and demand, setting intermediate targets in line with the NPB and the EBP Programme. These included a phased-in blending target of 10% for ethanol in 2022, as well as phased-in blending of 20% for ethanol by 2025. It also sought to double domestic ethanol production capacity from 2020 to 2025, to 15 billion litres (1500 crore litres). The extension of the EBP, directing OMCs to sell gasoline blended with 20% ethanol, and the development of guidelines for signing longterm offtake agreements for ethanol for OMCs in 2021, complemented the roadmap and the NPB.
Several Indian states have also developed policies to support deployment of ethanol. In 2018, Haryana launched its Bioenergy Policy, which provides exemptions on stamp and electricity duties for ethanol producers. Similarly, in 2022, Uttar Pradesh launched its Bioenergy Policy, and in 2023, Bihar launched its Biofuel Promotion Policy, which both provide similar duty exemptions for ethanol production facilities. In 2024, Maharashtra introduced its Integrated Bioenergy Policy, again providing similar exemptions to duties, as well as capital subsidies ranging from 40% to 100% for new ethanol projects. In 2025, Madhya Pradesh launched its Biofuels Scheme, providing similar duty exemptions as the
other states as well as a 40% capital subsidy up to USD 22.2 million (INR 200 crore) for new cellulosic-ethanol projects.
India has broadened support for ethanol development by providing financial support for the interest on loans used to retrofit existing, or develop new, ethanol production facilities under the Scheme for Cooperative Sugar Mills. Similarly to the Scheme to Enhance Ethanol Distillation Capacity implemented in 2018, it provides financial support for converting ethanol production facilities using sugar cane to ones that can use a range of feedstocks such as maize and damaged rice.
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