India is currently reviewing a request from the United States to ease restrictions on ethanol imports as part of ongoing trade negotiations. This request has raised significant concerns among domestic industry stakeholders and policy experts in India.

Sources familiar with the trade talks indicate that the United States has been advocating for India to remove import barriers on fuel ethanol, which is primarily used for blending with gasoline. India’s current policy framework includes restrictions on fuel ethanol imports and imposes duties on non-fuel ethanol imports, a strategy designed to protect and support its domestic ethanol industry.

“The approval for unrestricted import of American ethanol into India poses a serious threat to the nation’s circular economy, undermining the viability of domestic ethanol producers, farmers and biofuel-linked industries,” stated Daulat Desai, a retired IAS officer and a grain ethanol manufacturer. “It risks eroding investor confidence, endangering the financial exposure of banks that have financed existing and upcoming projects and dismantling India’s vision of a self-reliant and sustainable bioeconomy.”

India’s ethanol programme: A track record of success

This request from the US comes at a time when India has made remarkable progress in its domestic ethanol production and blending program. The country achieved a blending rate of 19.6 per cent in January 2025, with cumulative blending reaching 17.98 per cent in the 2024-25 ethanol supply year (till February), according to data from the Ministry of Petroleum and Natural Gas. This robust progress places India firmly on track to achieve its 20 per cent blending target by October 2025, five years ahead of the original 2030 target.

This success represents a significant improvement from a blending rate of just 1.53 per cent in 2013-14, demonstrating the effectiveness of India’s policy framework in developing domestic capacity. Ethanol supplies have grown substantially, from 380 million liters in 2013-14 to over 7 billion liters in the 2023-24 supply year.

The ethanol blending programme has been a cornerstone of India’s strategy for energy independence and rural economic development. The program has delivered substantial economic benefits, including approximately ₹41,500 crore saved in foreign exchange through reduced crude oil imports in 2024-25. It has contributed to reducing crude oil import dependence by approximately 2.5 per cent and preventing approximately 30 million tonnes of CO2 emissions during the same period..

Beyond energy security, the programme has provided significant benefits to rural economies by offering assured markets and stable prices for agricultural produce. It has generated over ₹65,000 crores of revenue for farmers through the sale of agricultural produce for ethanol production and created approximately 1,95,000 direct and indirect jobs in rural areas.

Investments and future outlook

The domestic ethanol industry has made substantial investments in expanding production capacity in response to the government’s ambitious blending targets. Over ₹25,000 crore have been invested in expanding distillery capacity in the past five years, with 131 new ethanol production projects approved under the Interest Subvention Scheme since 2018. Production capacity has reached 1,685 crore litres as of December 2024, with projected additional investment of ₹18,000 crore required to meet future targets.

State-owned oil refiners plan to increase ethanol purchases by almost 50 per cent from the previous year to 10 billion litres in the current supply year, reflecting the government’s strong commitment to the program. The ethanol program has also helped stabilise sugar prices by diverting excess production to ethanol and has encouraged crop diversification towards feedstocks like corn, which are less water-intensive than traditional crops.

Trade negotiations and policy implications

Commerce Minister Piyush Goyal is actively involved in ongoing trade negotiations. India’s efforts to reduce its substantial energy import bill and lessen its dependence on fluctuating global markets could be impacted by any relaxation of ethanol import rules. The government, led by Prime Minister Narendra Modi, is also acutely aware of the potential effects of unlimited green fuel imports on its farming community, a key demographic that the government has been encouraging to transition away from water-intensive crops towards alternatives like corn.

As trade talks continue, industry observers are closely monitoring whether India will prioritise the long-term interests of its energy security and rural economy in its decisions regarding trade concessions. The outcome of these negotiations holds significant implications for India’s bioenergy sector and its broader goals of self-reliance and sustainability.

The author is Managing Director of Samarth SSK Ltd and Co-Chairperson of the Sugar Bioenergy Forum (SBF) under the Indian Federation of Green Energy.)

Published on June 14, 2025