With the ethanol intake by state-run oil marketing companies (OMCs) not keeping pace with the capacity being built for the production of the bio-fuel, many units may go stranded, with potential implications for the debt contracted by them. The ethanol industry, especially the grain-based ones, is seeking a further hike in the ethanol blending with petrol, from the current level of 20%, and a freeze on new investment in the sector.
According to sources, ethanol manufacturers have submitted bids to supply over 17,760 million litres of the biofuel to the OMCs for the ethanol supply year 2025-26 (ESY) against the tender of 10,500 million litres. Out of total offers, over 4710 million litres is offered from sugarcane based feedstock units and more than 13,040 million litres is offered by the grain-based ethanol makers.
The investments in the ethanol industry so far have been over Rs 40,000 crore.
To deal with the overcapacities in bio-fuel manufacturing, the grain (rice and maize) based ethanol makers also demanded a cap on further investment in the sector.
“Units operating at 50% of their capacities would be unavailable, as we do not produce any other products unlike the sugar industry,” Chandra Kumar Jain, president, Grain Ethanol Manufacturers Association, told FE. He said based ethanol blending should be increased to 27% as in the case of Brazil so that capacities created over the years could be utilised.
Jain said that the government must expand its ethanol blending programme which has recently achieved 20% blending with petrol and promotion of flex fuel vehicles, which can also run on 100% ethanol so that excess manufacturing could be utilised.
Due to the ethanol blending programme, Jain said that Rs 40,000 crore foreign exchange has been saved in 2024-25.
While industry has set up a capacity of manufacturing 17,000 million litres of ethanol at present, OMCs buy around 11000 – 12000 million litres annually from them.
Currently out of the total 400 ethanol manufacturers, around 250 units are grain based (rice and maize). Rest of the units manufacture ethanol from sugarcane.
Meanwhile, price of ethanol from rice sourced from FCI has been hiked to Rs 60.32/a litre for ESY 2025-26, an increase of 3% over the previous ESY. However the price of bio-fuel produced from sugarcane juice/syrup remained unchanged at Rs 65.61/litre for ESY 2025-26.
Because of thrust given on the blending programme, from just 1.6% of ethanol blending programme in 2013-14, the blending of biofuels has increased to around 20% at present.
In 2022, under the amended National Policy on biofuels 2018, had advanced the target of 20% blending of ethanol in petrol from 2030 to ESY 2025-26.
According to an official note, the ethanol blending programme has resulted in payment to farmers of more than Rs 1.25 lakh crore from 2014-15 ESY till July 2025. In addition the programme has led to savings of more than Rs 1.44 lakh crore in terms of foreign exchange as the country imposes large quantities of crude oils.
Out of the total 11,000 million litres, grain based units have long term offtake agreements with OMCs for the buy-back agreement for 6000 million litres of ethanol. However 3000 to 3500 million litres of ethanol supplied by units to OMCs are not backed by long term offtake.