India’s Ethanol Blending Tops Targets Amid ₹40k Crore Investments, Pricing Challenges Cripple Sugar Mills

The launch of Ethanol Blended Petrol (EBP) programme in 2003 to bolster the use of alternative and environmentally friendly fuels and reduce dependency on energy imports initially helped create a new revenue stream for the struggling sugar mills, attracting investment of more than ₹40,000 crore since 2018 and resulting in a 140% increase in India’s ethanol production capacity, reported ET citing data from the Indian Sugar & Brio-Energy Manufacturers Association (ISMA).

Blending of ethanol with petrol has increased from a 1.5% in 2014 to 20% in 2025—five years ahead of the government’s target, despite some concerns regarding its effects on mileage and vehicle longevity. Ethanol traditionally relied significantly on sugarcane as its main source, until recently, due to the increase in foodgrain production and diversified feedstocks, grain-based ethanol has now emerged as the top contributor, accounting for nearly 72% of the blend while sugarcane’s share has dropped to 27%, leaving sugar mills.

Citing a press statement issued by Harshwardhan Patil, the president of the National Cooperative Sugar Factories Association, The Indian Express reported that the present price at which oil marketing companies procure ethanol from the sugar mills is not economical.

The report further stated that while there is a potential to divert up to 40 lakh metric tonnes (LMT) of sugar into ethanol this year, only 32 LMTs are expected to be diverted. This shortfall is attributed to the gap between ethanol prices and the better returns from selling sugar directly in the domestic market, resulting in underuse of India’s ethanol production capacity of 952 crore litres per year.

According to a news release by Ministry of Petroleum & Natural Gas, A study on life cycle emissions of Ethanol done by NITI Aayog has said that GHG emissions in case of use of sugarcane and maize based Ethanol are less by 65% and 50%, respectively than those of petrol. In addition to pollution reduction, there have been transformative benefits in terms of benefits to the rural economy, elimination of sugarcane arrears and improving the viability of maize cultivation in the country.

However, experts from the Indian Sugar Mills Association (ISMA) believe that revising ethanol procurement price in a way that it corresponds with the latest Fair and Remunerative Price (FRP) announced by the government for sugarcane, will help India capitalise on its ethanol production capacity, reported Fortune India.