NEW DELHI
India’s ethanol production capacity has skyrocketed to nearly 2,000 crore liters, significantly outstripping current domestic demand. A new report reveals that while capacity continues to expand rapidly, the market’s ability to absorb the biofuel has hit a visible bottleneck.
Currently, the required ethanol volume to meet the national E20 blending target stands at roughly 1,100 crore liters, alongside an additional 350 crore liters for non-fuel industrial use. Because the market only absorbs about 60 percent of what is offered, production plants face intense utilization pressures. Consequently, the industry is entering a consolidation phase, with factory operations expected to hover around 65 to 75 percent capacity for the next three years.
This rapid expansion has also created severe regional imbalances. Production is heavily concentrated in sugarcane-rich states like Uttar Pradesh, Maharashtra, and Karnataka. This leaves Maharashtra with a massive 277 crore liter surplus, while states like Tamil Nadu face a 77 crore liter deficit. Due to this uneven distribution, engineering and construction companies are shifting their focus away from building new plants toward improving operational efficiency at existing facilities.
It has been explained that the industry’s future depends heavily on the adoption of Flex Fuel Vehicles. To absorb the excess supply, the market share of these specialized vehicles needs to jump from five percent in 2028 to twenty percent by 2030. Without a massive push for higher fuel blends like E85, the sector will likely continue to face heavy margin pressures.
