India’s economy has been growing at a CAGR of ~6.4% during the period FY 2015-20 and consequently its energy demand has been increasing on the back-growing industrialization, economic development and rising human population. Globally, India is the 3rd largest energy and oil consumer in the world after China and US. The Indian Oil & Gas (O&G) industry is distinguished in the global context as it contributes to 5.2% of the global oil demand. As per the BP statistical review 2019, India is the third largest energy consumer in the world with oil and gas constituting about~ 36% of primary energy consumption, of which ~30% comes from crude oil and 6% comes from Natural gas. India is also an import- dependent country, meeting 84% of its oil demand and 52% of its gas demand through imports. Therefore, to ensure energy security in long run, government has initiated several steps to promote the renewable sources of fuels like bio-fuels to reduce dependency on mineral fuels.

Ethanol is a cleaner fuel and burns more completely than petrol. Ministry of New Renewable Energy proposed “The National Biofuel Policy 2018 to promote biofuel. As a result of global bio-fuel mandate, India has also been exploring various alternatives of renewable sources of energy and therefore rapid diversification of sugar industry for cogeneration and ethanol production is taking place in India too.

On the demand front, growing end-user industries demand for ethanol on the back of increase in vehicle population combined with rising oil prices. In India, the annual ethanol production has witnessed a fluctuating trend in line with seasonal fluctuation in sugarcane production. Ethanol production in India has grown by a 7% CAGR during the last decade while during 2015-20, it is estimated to have grown at 5%. Increasing demand for fuel blending as well as from industrial segment has ensured a steady demand for ethanol in the country. There are over 330 distilleries in India capable of producing rectified spirit, with an installed capacity of 6.84 billion liters per year. Out of this, nearly 200 distilleries have the capacity to distil ethanol (both denatured and un-denatured, with the capacity to distil about 3.5 billion liters of ethanol, for use in fuel, industrial chemicals as well as beverages.

On the consumption side, ethanol consumption is expected to outgrow production for the sixth consecutive year in 2020 and estimated to have grown CAGR of 8.5% in the last decade. During 2015-20, ethanol consumption is estimated to have grown at higher CAGR of 9% while domestic ethanol production with seasonality effect has increased at CAGR of 5%. The rise in domestic fuel prices and appealing ethanol purchase prices are driving the ethanol consumption growth, while consecutive above-average sugarcane harvests is supporting its production.

Driven by rising ethanol demand towards the achievement of targeted of Ethanol Blending Policy which was recently advanced to achieve 20% blend rate by 2025-26 instead of 2030. As per industry sources, the country will need nearly 10 Bn liters of fuel ethanol for the 20% blending requirement, while India’s current overall ethanol manufacturing is estimated at 3.6 Bn liters.

Road Map for Ethanol Blending in India 2020-25