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India's Ethanol Glut: Billions of Liters Unused
27 Sep
Summary
- India faces a significant ethanol oversupply, with seven billion litres lacking a market.
- Installed ethanol capacity has surged, exceeding domestic fuel and non-fuel demand.
- Producers operate at 60% capacity, with limited export options providing minimal relief.
India's ethanol sector is experiencing a severe oversupply, with approximately seven billion litres of unused capacity available. This situation arises from rapid capacity expansion aimed at reducing crude oil imports through fuel blending, which has now outstripped both domestic fuel needs and consumption by sectors like liquor and pharmaceuticals.
Producers are operating at roughly 60% capacity, a utilization rate expected to persist for the next three years. Maharashtra alone faces a projected surplus of 2.77 billion litres. While India has supplied 8.95 billion litres for fuel blending by August, this falls short of contracted volumes.
Efforts to increase mandatory blending beyond E20 are paused due to consumer concerns, with the government evaluating the E20 program's long-term impact until 2027. Innovative solutions like differential pricing for various ethanol blends, as seen in the US and Brazil, are being considered to encourage broader adoption.
Exports provide only marginal relief, with restrictions on first-generation ethanol and limited uptake of second-generation ethanol. The industry is also exploring the potential of blending ethanol with diesel, which could create substantial market opportunities, such as a 2% Bio-IBA mandate potentially generating over ₹3,000 crore in project value.
