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India's Ethanol Boom Backfires: Supply Glut Threatens Green Energy Goals
22 Feb
Summary
- Ethanol capacity far exceeds demand, leading to over 50% excess.
- Distilleries operate at only 25-30% capacity due to low offtake.
- Government mandate for higher blending targets is crucial for industry viability.
India's ethanol sector, once hailed as a leader in the green energy transition, is now confronting a significant supply glut. The nation possesses nearly 20 billion liters of installed ethanol production capacity, with an additional 4 billion liters expected soon. However, the requirement for mandatory 20% ethanol blending with petrol (E20) is estimated at only about 11 billion liters for the current ethanol year. This imbalance results in over 50% excess capacity, an unintended consequence of policy initiatives that advanced without a defined long-term roadmap.
Distilleries are currently operating at only 25-30% of their capacity, and fresh approvals for new plants have been halted. This strain impacts the entire value chain, from sugar mills and grain processors to farmers who were encouraged to view ethanol as a stable revenue alternative. The industry, valued at Rs 50,000 crore, urgently requires government intervention through increased blending targets to ensure optimal utilization of its infrastructure and maintain investment viability.
