The Indian ethanol industry is facing a surplus due to a sharp rise in production capacity, but domestic consumption has not kept pace. According to CK Jain, President of the Grain Ethanol Manufacturers Association (GEMA), ethanol consumption has remained steady at around 1,200 crore litres, despite the industry’s capacity to produce 1,500 crore litres. The industry had expanded rapidly between 2020 and 2022, driven by government signals to increase ethanol blending, but actual ethanol purchases have not met projections.
Exporting ethanol is not a viable option, as Indian ethanol is uncompetitive in global markets due to high grain prices. Grain-based ethanol accounts for the majority of production, and about 70-72% of the ethanol price goes directly to farmers, making it difficult for Indian producers to compete with international prices. Second-generation ethanol, which is allowed for export, is not being produced in significant quantities.
The industry is facing a gap between policy expectations and actual demand, with production capacity built up to 1,770 crore litres, but actual allocation remaining at around 1,050 crore litres. Jain emphasized that fears about large-scale diversion of grains to ethanol are outdated, as only 15-20% of total grain output is used for ethanol, and wheat and rice procured by the Food Corporation of India remain unaffected. Ethanol production mainly uses maize and damaged food grains, which has helped improve farmer incomes.
Jain warned that without clarity on future blending targets and stronger domestic demand, the industry could face difficulties going forward. He noted that grain-based ethanol played a crucial role in achieving 20% ethanol blending in petrol, but the industry needs a clear direction to sustain growth. The government’s support and policy clarity are essential to address the surplus and ensure the long-term viability of the ethanol industry. Overall, the Indian ethanol industry is at a crossroads, and addressing the demand-supply gap and export competitiveness will be crucial to its future growth and development.