India ethanol industry faces a severe crisis; cos in a mad scramble

Nifty23, 140.5077.41. Motilal Oswal Midcap Fund Direct-Growth.

Key points

• (Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.).
• While non-fuel sectors including liquor, pharmaceuticals and chemicals, consume another 3-3.5 billion litres, nevertheless, the E20 fuel blending programme requires only concerning 11 billion litres annually.
• Almost 7 billion litres without a market: Ethanol glut in India fuels search for new buyers.
• The country's installed ethanol capacity has reached regarding 20 billion litres and, according to industry experts, another four billion litres will be went on this year.
• India ethanol industryethanol oversupply crisisE20 fuel blending programmeethanol producersdomestic ethanol demandcrude imports reductionoil marketing companiespraj industries.

Nifty23, 140.5077.41. Motilal Oswal Midcap Fund Direct-Growth. The Economic Times daily newspaper is available online now.

Almost 7 billion litres without a market: Ethanol glut in India fuels search for new buyers. ET BureauLast Updated: Sep 27, 2026, 06: 07: 00 AM IST.

India's ethanol industry is deluged with severe oversupply, with almost 7 billion litres of capacity without a clear market. While E20 blending needs around 11 billion litres and non-fuel sectors consume another 3-3.5 billion litres, installed capacity has reached regarding 20 billion litres. Listen to this article in summarized format. Unlock AI Briefing and Premium Content. New Year Offer 24 Hours Left. Subscribe Now Already a member? Sign In.

New Delhi: As India's ethanol industry contends with a severe oversupply crisis, manufacturers are continuing to scramble for new buyers and alternative markets to absorb almost seven billion litres of unused surplus capacity. Rapid capacity expansion over recent years, driven by the government's aggressive fuel blending push to reduce dependence on crude imports, has far outpaced domestic demand, forcing ethanol producers to operate well below capacity, industry executives informed ET. The country's installed ethanol capacity has reached regarding 20 billion litres and, according to industry experts, another four billion litres will be went on this year.

While non-fuel sectors including liquor, pharmaceuticals and chemicals, consume another 3-3.5 billion litres, nevertheless, the E20 fuel blending programme requires only concerning 11 billion litres annually. That has left almost seven billion litres without a clear market. Nitin Gadkari notes switching to a 100% ethanol car can cut fuel bills to just Rs 25 per litre Live Events.

Distilleries are operating at barely 60% capacity, with utilisation projected to remain between 65% and 75% over the next three years, according to senior industry office-holders involved in the business. Maharashtra alone faced a projected surplus of 2.77 billion litres. By August, suppliers had delivered 8.95 billion litres to oil marketing firms for fuel blending against 10 billion litres contracted for 2025-26 (November-October). Meanwhile, the administration has paused any move to mandatorily implement higher flexi-fuel blends to E25 or E30 against the backdrop of consumer backlash against E20. In practice, the roadmap remains capped at E20 until October 31, 2026, and the Centre has informed the Supreme Court that the programme's long-term impact will become clear only by 2027. Differential Pricing "Instead of mandating a single blend for all, we should move to differential pricing for different ethanol blends – E10, E20, E85, " remarked Ravindra Utgikar, chief sales officer at Wilo India, a major provider of pumping systems to ethanol distillers. "This is already working well in the US and Brazil. While still driving higher ethanol adoption overall, " he informed ET, it gives vehicle owners the choice to pick fuel based on their vehicle's age, technology and compatibility. Utgikar has worked in the biofuels industry for almost two decades. The industry needs new buyers. Exports offer limited relief. First-generation ethanol exports remain restricted in the country. India has cleared only second-generation ethanol for exports since September 2025. Small non-fuel volumes go to Tanzania, Angola and Kenya, while the Grain Ethanol Manufacturers Association (GEMA) is in discussions with Nepal. It aims a 10% blending manda-"Instead of mandating a single blend for all, we should move to differential pricing for different ethanol blends – E10, E20, E85, " noted Ravindra Utgikar, chief sales officer at Wilo India, a major provider of pumping systems to ethanol distillers. "This is already working well in the US and Brazil. While still driving higher ethanol adoption overall, " he informed ET, it gives vehicle owners the choice to pick fuel based on their vehicle's age, technology and compatibility. Utgikar has worked in the biofuels industry for almost two decades. The industry needs new buyers. Exports offer limited relief. First-generation ethanol exports remain restricted in the country. India has cleared only second-generation ethanol for exports since September 2025. Small non-fuel volumes go to Tanzania, Angola and Kenya, while the Grain Ethanol Manufacturers Association (GEMA) is in discussions with Nepal. It aims a 10% blending mandate but lacks feedstock and distillery capacity. The administration and industry are exploring possibilities of blending ethanol with diesel now. "Our bio-isobutanol technology is ready for commercialisation and scale-up, and we expect the first order in the current quarter of FY27. With diesel demand far larger than petrol, bio-IBA blending could become a significant milestone in India's biofuels journey, " remarked Ashish Gaikwad, managing director, Praj Industries, an industrial biotechnology and engineering business specialising in turnkey bio ethanol facilities. "Even a 2% Bio-IBA blending mandate in diesel could create a project opportunity of more than `3, 000 crore, " he continued. Not every litre of ethanol becomes fuel. Undenatured ethanol applied in liquor, pharmaceuticals and laboratories makes up almost 18.7% of demand. For context, the related extra neutral alcohol market hit regarding 3.80 billion litres in 2025, growing around 5% a year as drinkers move from country liquor to IMFL. Add Now!

Taken together, the developments around india ethanol industry faces a severe crisis; cos in a mad scramble point to a situation that is still moving, and the coming days should bring more clarity.