India’s ethanol production capacity has grown to approximately 2,000 crore litres, with an additional 400 crore litres expected to be operational by fiscal 2027, as per a recent report. The demand for E20 blending stands at around 1,100 crore litres, with an additional 300-350 crore litres for nonfuel purposes. However, only about 60% of the offered ethanol is being utilized, leading to sector-wide utilization challenges.
Capacity expansion is primarily concentrated in states like UP, Maharashtra, and Karnataka, resulting in regional surpluses and deficits. The surplus supply, amounting to roughly 700 crore litres, has put pressure on margins within the industry. The report suggests that the sector is moving towards a consolidation phase, with utilization projected to remain between 65-75% over the next few years.
The report also emphasizes the need for increased FFV penetration and investments in logistics and distribution to meet the rising demand, expected to reach 1,200 crore litres by ESY 2026-27 and 1,600 crore litres by ESY 2029-30. Without a boost in demand triggers like higher ethanol blends and FFV adoption, the forecast indicates that new capacity additions may face absorption challenges in the short term.
India achieved an average 20% ethanol blending level in petrol by December 2025, ahead of schedule. The Ministry of Road Transport and Highways (MoRTH) proposed draft amendments to potentially raise the blending level to E85 or exclusive ethanol fuel. Ethanol is gaining global recognition as a sustainable fuel, offering benefits such as reduced greenhouse gas emissions, enhanced energy security, and support for renewable energy transitions worldwide.
