India’s achievement of 20 per cent ethanol blending (E20) in petrol ahead of its original 2030 target marks a significant milestone in the country’s energy transition, with E20 fuel being sold across the country from April 1. Prime Minister Narendra Modi’s celebration of this development is understandable, especially amid ongoing geopolitical tensions in global energy markets. What began as a modest pilot in 2001, followed by the Ethanol Blended Petrol (EBP) program in 2003, has evolved into one of the world’s most ambitious biofuel initiatives, making India the third-largest ethanol producer after the US and Brazil.
Policy support has played a decisive role in this transformation. Since 2014, several measures, including administered pricing mechanisms, interest subvention schemes, and feedstock diversification (from C-heavy to B-heavy molasses, maize, and broken rice), have helped scale up ethanol production. The multipronged benefits of EBP are evident. On the environmental front, ethanol blending reduces carbon monoxide and hydrocarbon emissions. For farmers and distillers, it creates an additional income stream, particularly in sugarcane-producing regions. During 2014-24, sugar mills have earned over Rs 94,000 crores from ethanol sales, and cleared 98.3 per cent of cane dues in Sugar Season 2022-23, signalling a major improvement from earlier.
Beyond environmental and rural income gains, EBP was expected to reduce India’s dependence on imported crude oil. However, this expectation has only been partially realised. During 2014–24, EBP resulted in crude oil substitution of about 193 lakh metric tonnes, yet despite achieving the 20 per cent blending rate last year, the substitution of around 4.5 crore barrels translated into less than a 3 per cent decline in crude oil import bill due to substitution. Moreover, total imports continue to rise, driven by growing demand for transportation and personal vehicle ownership. Recent geopolitical tensions have further underscored India’s continued oil import dependence, sharpening policy interest in deeper domestic fuel substitution.
In this context, recent calls to push ethanol blending to 30 per cent need a comprehensive evaluation. In 2025, India produced around 985 crore litres of ethanol, according to the Renewable Fuel Association. Earlier, the Niti Aayog report had estimated E20 requirements at 1,016 crore litres. Following the same approach, achieving E30 by 2030 would require around 1,735 crore litres. Factoring in the adoption of electric and flex-fuel vehicles, a crude estimate for ethanol demand under E30 may range between 1,700-1,800 crore litres for petrol blending.
Higher blending through domestic production could provide India with a stronger strategic lever against global oil shocks, but with several trade-offs. The first set is environmental. Ethanol production from sugarcane and rice is highly water-intensive; producing one litre of sugarcane-based ethanol requires nearly 2,860 litres of water, with rice-based ethanol requiring even more. As ethanol demand has grown, intensified sugar production and diversion toward fuel have exacerbated groundwater depletion in already water-stressed regions, such as parts of UP, Maharashtra, and Karnataka. While maize offers a relatively less water-intensive alternative, scaling it up carries its own implications for land-use, cropping patterns, and diversion of produce away from existing uses.
Second is the question of food security. India has recently increased ethanol production from surplus food grains, including broken rice. The risks of diversion became evident in 2023, when lower sugarcane and rice output prompted the government to restrict these feedstocks to distilleries. Though current foodgrain stocks are above the buffer norm, a high probability of an El Niño episode this year could adversely affect monsoon patterns and paddy production. In such a scenario, expanding ethanol production from food-based feedstock could intensify pressure on food availability, making it imperative for policymakers to tread cautiously.
Third, with structural challenges in production capacity, moving from E20 to higher blending ratios would necessitate not only new distillery investments, both molasses-based and grain-based, but also expansion of existing facilities. Storage and transportation infrastructure for ethanol would need to be scaled up significantly to accommodate increased supply. These are capital-intensive adjustments that require investment, careful planning, and policy coordination.
Fourth, the automotive ecosystem may not be fully prepared for higher blending levels. Since 2023, the new vehicles being sold in India have been made E20-compliant. While the majority of the vehicles running in India are not even E20 compliant, moving to E30 or higher blends would require further engine modifications. Without such adjustments, consumers could face reduced fuel efficiency and higher maintenance costs, undermining public acceptance of the policy.
Given these challenges, India’s next phase of biofuel expansion requires a more calibrated strategy. Policy options include shifting focus from sugarcane to less water-intensive feedstocks and prioritising plant-specific incentives in ethanol-deficient states, though domestic supply constraints may limit this transition. Importing ethanol from major producers such as Brazil may offer a complementary pathway. India’s ongoing trade negotiations with the United States may also include discussions on ethanol or related commodities import. However, the most critical priority must be scaling second-generation (2G) ethanol. Produced from agricultural residues and non-food biomass, 2G ethanol directly addresses concerns around water stress and food security. Without this shift, higher ethanol blends risk substituting one set of vulnerabilities with another, rather than delivering resilient energy security and environmental sustainability.
Jaiswal is consultant, CSEP, and Goyal is Research Associate, CSEP
