India faces ethanol surplus as capacity outstrips domestic demand

India's ethanol capacity has risen to about 20 billion litres, with an additional four billion litres expected this year, but domestic blending targets have lagged, leaving almost 7 billion litres without a market. Industry leaders argue for a tiered pricing system for different ethanol blends, a model used in the United States and Brazil, to give consumers choice while boosting overall adoption. Export opportunities are limited; only second-generation ethanol is permitted for overseas sales, with small volumes reaching Tanzania, Angola and Kenya, and talks ongoing with Nepal.

Companies such as Praj Industries are preparing to commercialise bio-isobutanol for diesel blending, which could generate projects worth over ₹3,000 crore if a 2 % mandate is introduced. Meanwhile, undenatured ethanol continues to serve liquor, pharmaceutical and laboratory sectors, accounting for roughly 18.7 % of demand.