India’s ethanol industry is facing a growing surplus as domestic demand has stopped rising and exports are not a practical option, according to CK Jain, President of the Grain Ethanol Manufacturers Association (GEMA).
Speaking on the issue, Jain said ethanol consumption in the country has levelled off at around 1,200 crore litres, even though production capacity has expanded to nearly 1,500 crore litres. “We have the capacity to supply much more, but consumption has stalled,” he said.
Despite the excess supply, Jain ruled out exports as a solution. He explained that Indian ethanol is not competitive in global markets because grain prices in India are among the highest in the world. “We are essentially converters, and nearly 70–72 per cent of the ethanol price goes to farmers,” he noted.
While the government has allowed exports of second-generation (2G) ethanol, Jain said production of this type is currently negligible. Grain-based, or first-generation (1G), ethanol, he added, cannot compete on price internationally.
Jain pointed out that the industry expanded rapidly between 2020 and 2022 after strong policy signals from the government encouraging ethanol blending beyond the 20 per cent target. Based on these assurances, companies made large investments and significantly increased capacity.
However, he said actual ethanol procurement has fallen short of policy expectations. According to earlier projections under the NITI Aayog biofuel policy, ethanol consumption was expected to reach at least 1,500 crore litres by 2025. In reality, while producers offered capacity of about 1,770 crore litres, actual allocations were only around 1,050 crore litres.
Addressing concerns about food security, Jain said fears about grain diversion to ethanol are outdated. He stressed that only 15–20 per cent of the total grain basket is used for ethanol, and essential staples like wheat and rice procured by the Food Corporation of India remain protected.
He also noted that maize, a key ethanol feedstock, is rarely used for human consumption. “Only about one to two per cent of maize is consumed as food,” he said, adding that ethanol production has helped turn maize into an industrial crop, boosting farmer incomes.
Jain concluded by saying that grain-based ethanol played a crucial role in achieving the E20 blending target. However, without clear future blending goals and stronger domestic demand, the ethanol industry could face serious challenges in the coming years.
