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Informist, Monday, Aug. 25, 2025

 

By Afra Abubacker

 

MUMBAI – After India achieved 20% ethanol blending with petrol, the biofuel industry finds itself at a crossroads. Distillers are hopeful of higher blends but tread with caution. Automakers have raised efficiency concerns while biofuel producers struggle with stagnant ethanol prices and rising feedstock costs. Ethanol producers are now betting on ethanol blending in diesel, sustainable aviation fuel, and other co-products to keep growth on track.

 

"India has achieved its EBP20 target ahead of scheduled target of 2025 end," Ashish Gaikwad, managing director of Praj Industries Ltd., was quoted as saying in a transcript of the conference call with analysts after the company's June-quarter earnings announcement. The biofuel tech major said that the next breakthrough could come from diesel, where consumption is nearly three times that of petrol. Ethanol can be used as a "drop-in fuel" that blends directly with diesel and runs in existing truck engines without modification, Gaikwad was quoted as saying.

 

"We believe diesel can also have a (ethanol) blending mandate. Alcohol just blends into diesel and can be used without any problems in the engine," Gaikwad said. Praj Industries said that though electric vehicles are gaining traction, there are few options to reduce carbon emissions in heavy-load vehicles that run on diesel. Currently, India blends used cooking oil into diesel to make biodiesel, but the progress has been slow due to poor collection and segregation infrastructure for used cooking oil.

 

India started mixing ethanol with petrol as pilot project in 2001 and gradually raised the blending in successive years. Oil marketing companies buy ethanol from distillers at government fixed rates and blend it with petrol to promote green mobility and reduce crude oil import dependency.

 

SLOW DEMAND

Despite India achieving 20% ethanol blending ahead of schedule, Praj Industries said that orders for new ethanol plants have slowed down. "The excess installed capacity has led to temporary slowdown in conversion of new inquiries into firm orders and new greenfield ethanol plants," Gaikwad was quoted as saying. The company expects orders to improve once the government announces higher blending mandates.

 

In the meantime, Praj Industries is focusing on advanced technology upgrades for existing plants and value-added products. "While we are witnessing slowness in inquiries of greenfield plants, we are focusing on offering plant modifications as well as solutions as co-products such as Distillers Corn Oil called DCO, rice protein, etc. These are gaining increasing interest from the existing ethanol producers," Gaikwad was quoted as saying.

 

Some ethanol producers also appeared cautious about making fresh investments until there is clarity on government blending mandate. "We've just finished up last year, our ethanol capex. So, capex cycle is largely concluded. It is a phase of consolidation right now...We don't have any plans for expansion. We'll have to wait to see how policy pans out," Muthiah Murugappan, whole-time director, E.I.D.-Parry (India) Ltd., was quoted as saying in a transcript of its June quarter earnings conference call.

 

Instead, the way forward is diversifying feedstock, the management said. "If at all, there's something we might consider, we have one dual feed distillery. We might consider repurposing one or two of our other distilleries to operate on both grain as well as molasses-based feedstock. But this is again subject to obtaining policy clarity and further internal evaluation," Murugappan said. 

 

In the last two years, the share of ethanol from grains has increased over that of molasses in the ethanol basket. "The (ethanol) demand could not have been fulfilled by the sugar industry owing to lack of raw material. And the year previous to that, they just put a grinding halt suddenly on (sugar) diversion. So, the demand needed to be fulfilled, maize came and did the gap filling," Vivek Saraogi, chairman and managing director, Balrampur Chini Mills Ltd., was quoted as saying in their post-earnings conference call transcript.

 

Ethanol can be made from starch-containing feedstock like molasses and grains. The molasses-basket contains sugarcane juice, B-heavy molasses, and C-heavy molasses, while the grains basket has maize, rice, and damaged foodgrain. 

 

BLENDING PAIN POINTS

Now that E20 has been achieved, the government plans to gradually scale up to E25, E27, and eventually E30 in a phased manner, supported by BIS standards and fiscal incentives. However, the biofuel ecosystem is facing pushbacks on multiple fronts. Concerns have been raised about fuel efficiency, vehicle compatibility, and the diversion of food crops for fuel production. There is also a growing consumer criticism against the compulsory use of blended petrol.

 

"Using E20 results in a marginal reduction in fuel efficiency for four-wheelers designed for E10 and calibrated for E20," Minister of State for Petroleum and Natural Gas Suresh Gopi said in a written reply to the Lok Sabha. However, with engine modifications, the efficiency loss can be reduced, he added.

 

Amid these concerns, a public interest litigation has been filed in the Supreme Court against E20. The petition has asked the government to ensure that 100% petrol remains available at all retail outlets and to mandate clear labelling of ethanol content in blended fuel.

 

Challenges are also growing within the producer circles. Companies have flagged that ethanol production will depend on the government's revision in ethanol prices. Prices of ethanol produced from most feedstocks have remained unchanged for over two years while feedstock costs such as sugarcane continue to rise, eating into margins. 

 

"Lastly, what we are dealing with right now is the ethanol pricing...We are in active persuasion with all Government sources for juice, B-heavy molasses, both prices and this year being a surplus year. So, let me put my thinking on the table a bit. Last two years, the environment was not that of surplus (sugar production). Next year, the first year we are entering surplus production," Balrampur's Saraogi was quoted as saying.

 

The company said if the government wants higher sugar diversion, it will need to incentivise ethanol production. "I personally feel that the ethanol price would increase because this is the only thing which will kickstart the (sugar) diversion and maybe take it to even beyond 4.5 million tonnes. It is the need of the hour, beneficial for the country, and owing to the surplus, I guess there is not much of an option," Saraogi said. 

 

From the 2025-26 sugar year (Oct-Sep), the industry hopes to divert 4.5 million tonnes to 5.0 million tonnes of sugar or sucrose for making ethanol. However, they stress that diversion will depend on the hikes in ethanol prices. In 2024-25, industry estimates about 3.2 million tonnes of sugar diversion for ethanol production.

 

EID Parry, too, warned that stagnant ethanol prices are demotivating and eroding margins. ""There is a lot of representation we've been doing to the government on ethanol pricing...Yes, it's concerning for us that the last three years, we have not had a price increase. The FRP (Fair and Remunerative Price) of cane, which is our feedstock, keeps increasing year-on-year," the company said.

 

Though ethanol sales were steady in the June quarter, EID Parry said stagnant ethanol rates have limited the profitability in biofuel segment. EID Parry reported 26 million litres of ethanol sales, alongside 15.3 million litres of extra neutral alcohol, taking total distillery sales to 41.3 million litres in Apr–Jun, compared with 39 million litres a year ago. Realisations improved modestly to INR 67.59 per litre from INR 64.31 per litre, it added. Revenue from distillery segment was INR 2.96 billion, up from INR 2.63 billion in the corresponding quarter of the previous year.

 

The government is likely to release the roadmap for higher ethanol blends by August end, Transport Minister Nitin Gadkari was quoted as saying by media reports. Going forward, the biofuel industry will have to adopt advanced technology, secure favourable government policies, and gain consumer confidence to ensure successive roll out of higher ethanol blends beyond E20.  End

 

Edited by Ashish Shirke

 

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