India Ethanol Market Outlook to 2028

India Ethanol Market Overview

• The India ethanol market has experienced notable growth, this is reflected by the global ethanol market reaching a valuation of 13.8 billion liters in 2023. This growth is driven by the government's ethanol blending program, increased demand for ethanol-blended fuels, and the expanding pharmaceutical and chemical industries.
• The market is characterized by key players such as Praj Industries, Indian Oil Corporation, Bharat Petroleum Corporation, Reliance Industries, and Balrampur Chini Mills. These companies are noted for their extensive production capacities, continuous investments in research and development, and robust distribution networks, which enable them to meet the growing demand for ethanol across various sectors.
• Cities such as Mumbai, Pune, Delhi, and Chennai dominate the ethanol market in India. Mumbai and Pune are hubs for the automotive industry, leading to high demand for ethanol-blended fuels. Delhi, being the capital city, has stringent regulations on emission standards, thus encouraging the use of ethanol-blended fuels.
• In 2023, Indian Oil Corporation announced the establishment of a new ethanol plant in Panipat, Haryana, with a production capacity of 100 kiloliters (KL) per day. This development is part of Indian Oil's strategy to enhance its market presence in India by increasing the availability of ethanol-blended fuels, supporting the government's ethanol blending targets.

India Ethanol Market Segmentation

The India ethanol market can be segmented by various factors such as feedstock, end-use industry, and region.

By Feedstock: India ethanol market is segmented by feedstock into sugarcane, corn, and cellulosic materials. In 2023, sugarcane-based ethanol dominated this segment due to the abundant availability of sugarcane in India and the well-established sugar industry infrastructure that facilitates large-scale ethanol production. The vast availability of sugarcane and the infrastructure in place for its processing make it the most reliable and widely used feedstock for ethanol production in the country.

By End-Use Industry: India ethanol market is segmented by end-use industry into automotive, pharmaceutical, and chemical industries. In 2023, the automotive industry was the dominant segment, driven by the increasing adoption of ethanol-blended fuels in response to government mandates and the push for greener, more sustainable fuel alternatives. Government mandates and environmental concerns are driving the shift towards greener fuels, making the automotive industry the primary growth driver for the ethanol market.

By Region: India ethanol market is segmented by region into North, South, East, and West. In 2023, the North region dominated the market, primarily due to the high concentration of sugarcane production in states like Uttar Pradesh and Haryana, and the presence of major ethanol production facilities. The presence of key production facilities and strong governmental support for ethanol initiatives further strengthens this region's position in the market.

India Ethanol Market Competitive Landscape

• Praj Industries: In 2023, Praj Industries, in collaboration with Indian Oil Corporation, continued its leadership in the biofuel sector by advancing biofuel production capacities in India. The collaboration focuses on utilizing innovative technologies, including Praj's proprietary 2G ethanol technology, to enhance sustainable biofuel production. This partnership aligns with India's broader goals of energy self-reliance and sustainability, contributing to the nation's green energy transition and circular economy practices.
• Bharat Petroleum Corporation Limited (BPCL): BPCL has initiated a project to produce ethanol from corn, aiming to leverage the crop's high yield and market price support for farmers. The company is expected to increase its ethanol production by 30% by 2025, contributing to the overall growth of the ethanol market and supporting the government's blending targets.

India Ethanol Industry Analysis

India Ethanol Market Growth Drivers

• Rising Demand for Biofuels: India's increasing demand for biofuels is indeed driven by a combination of factors, including rapid industrialization, urbanization, and a pressing need to address air pollution and high oil import costs. The country is projected to significantly enhance its biofuel production and consumption over the next few years. According to the International Energy Agency (IEA), India has the potential to nearly triple its biofuel consumption and production by removing existing barriers to higher ethanol blends and diversifying the use of biofuels to replace diesel and jet fuel.
• Agricultural Sector Participation: Ethanol production is expected to provide additional revenue streams for farmers, supporting rural economic development. The projection of a 10 million metric ton increase in corn production over the next five years is consistent with India's strategy to utilize surplus grains and corn for bioethanol production. Currently, ethanol production in India stands at around 2 million metric tons, and the government aims to enhance this capacity significantly.
• Sustainable Fuel Alternatives: The Indian government has set ambitious targets for ethanol blending, advancing its goal to achieve 20% blending by 2025-26, which is expected to result in substantial savings on oil imports and contribute to energy security.The formation of the Global Biofuels Alliance further emphasizes India's commitment to increasing bioethanol production and enhancing its role in the global biofuel market.

India Ethanol Market Challenges

• Fluctuating Raw Material Prices: The volatility in the prices of raw materials, particularly sugarcane and corn, presents a significant challenge for ethanol producers in India. Various factors, including changes in weather conditions, global demand-supply dynamics, and domestic agricultural policies influence these fluctuations.
• Regulatory and Inter-State Movement Challenges: The implementation of the amended provisions of the industries (Development & Regulation) Act, 1951, which facilitates the smooth movement of ethanol across states, has been inconsistent. As of now, only 14 states have fully implemented these provisions, leaving significant regions, including major consumption areas, without adequate access to ethanol.

India Ethanol Market Government Initiatives

• National Policy on Biofuels (2018): The National Policy on Biofuels in India aims to promote biofuel production and use to enhance energy security, reduce fossil fuel imports, and support farmers. It allows ethanol production from a wider range of feedstocks and sets a target of 20% ethanol blending in petrol by 2025-26. The policy provides financial support for 2G ethanol bio-refineries and encourages the establishment of biofuel production hubs. By increasing domestic biofuel production, the policy seeks to create jobs, boost farmers' incomes, and contribute to cleaner air and lower greenhouse gas emissions.
• Interest Subvention Scheme (2018-2025): Launched in 2018, the Interest Subvention Scheme has played a crucial role in boosting India's ethanol market by providing sugar mills with financial support to establish and expand ethanol production facilities. The scheme offers a 6% annual interest subsidy on loans for setting up new distilleries or upgrading existing ones, significantly increasing the country's ethanol production capacity.

India Ethanol Future Market Outlook

The India ethanol market is anticipated to experience significant transformation by 2028, driven by a combination of strategic government initiatives, rising consumer demand for sustainable energy sources, and advancements in production technologies.

Future Trends

• Increased Investment in Production Facilities: By 2025, companies are expected to significantly increase their investments in expanding ethanol production facilities. The focus will be on adopting cutting-edge technologies that improve efficiency and lower production costs. This trend aims to support government blending targets and drive sector growth, with production capacity anticipated to surpass 1,700 crore liters by the same year.
• Diversification of Feedstock Sources: By 2026, the ethanol market is likely to experience a notable shift towards utilizing a wider variety of feedstocks, including surplus grains and agricultural waste. This diversification will help secure a steady supply of raw materials and promote sustainable agricultural practices. Projections suggest that the use of non-food feedstocks could increase by 10 million metric tons over the next five years.