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In brief
Bioenergy in India is evolving from a collection of fuel-substitution programs into a broader economic and industrial opportunity. Ethanol, sustainable aviation fuel (SAF), biomass briquettes and pellets offer complementary pathways to reduce fossil fuel dependence while generating value from agricultural produce, residues and waste.
India’s ethanol program demonstrates what coordinated policy, investment and procurement can achieve. Ethanol procurement by public-sector oil marketing companies increased from 38 crore liters in Ethanol Supply Year 2014 to 816 crore liters in 2026. The program has delivered foreign exchange savings exceeding INR1.9 lakh crore, reduced more than 310 lakh metric tons of crude oil and generated over INR1.6 lakh crore in additional farmer income.
Ethanol blending in India has progressed from a limited fuel program into a central pillar of transport decarbonization. With the country achieving the E20 milestone, the next phase is likely to be shaped by petrol consumption, flex-fuel adoption and emerging applications such as aviation fuel, chemicals and industrial solvents.
The outlook for ethanol demand remains positive. Under a more ambitious pathway that includes E30 blending, flex-fuel deployment and SAF adoption, annual demand could exceed 5,100 crore liters by 2050. However, production capacity is already estimated at approximately 2,000 crore liters, while E20 requires roughly 1,100 crore liters. The priority should therefore shift from indiscriminate capacity expansion to creating productive and commercially sustainable applications for available ethanol.
Feedstock choices will be equally important. Grain-based sources accounted for approximately 67% of ethanol supplies up to June 2026, with maize becoming the largest individual feedstock. Greater focus on 2G ethanol in India, agricultural residues and lower-water crops could reduce pressure on food, land and water resources while supporting advanced fuel production.
SAF represents the next major growth opportunity within the India biofuel market. India has announced indicative SAF blending targets for international flights of 1% by 2027, 2% by 2028 and 5% by 2030. A 5% blend could create annual demand of approximately 0.55 million to 0.56 million tons, depending on the aviation fuel base covered.
The SAF market in India is likely to develop through several production pathways. Used cooking oil, refinery co-processing. Hydroprocessed Esters and Fatty Acids (HEFA) technologies can support early deployment. Alcohol-to-Jet (ATJ) could become an important medium-term route by using India’s established ethanol ecosystem. Fischer-Tropsch and power-to-liquid technologies may contribute over the longer term as their economics and commercial maturity improve.
India has nearly 230 million tons of surplus agricultural residue, growing aviation fuel demand, established refining capabilities and experience in scaling biofuel programs. Together, these strengths could support domestic SAF production and future exports to markets with tightening aviation-fuel mandates.
However, feedstock availability alone will not create a competitive industry. SAF remains considerably more expensive than conventional aviation fuel. Long-term offtake agreements, concessional finance, traceable feedstocks, internationally accepted certification and mechanisms to distribute the green premium will be essential to make projects bankable.
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Biomass pellets in India and biomass briquettes in India can support the decarbonization of thermal power generation and industrial heat. Approximately 1,100 pellet plants have already been established, with much of the investment coming from MSMEs, first-generation entrepreneurs and farmer-linked enterprises.
At current utilization levels of approximately 63%, the industry produces about 12.6 million tons of pellets annually and consumes around 14.6 million tons of agricultural biomass. Under a 5% coal-replacement scenario, the ecosystem could expand to nearly 3,500 plants, require approximately INR38,500 crore in investment and produce 43.7 million tons of pellets annually.
The challenge is not simply constructing more plants. Inconsistent procurement by thermal power producers and uncertainty around benchmark pricing can weaken project economics and leave existing facilities underutilized.
Investment opportunities extend across flexible ethanol plants, SAF facilities, refinery upgrades, biomass aggregation, storage, multimodal logistics, certification and digital traceability. The strongest projects are likely to combine secure feedstock catchments, appropriate technologies, dependable buyers and measurable environmental performance.
The National Policy on Biofuels provides an important foundation, but the next phase will require stronger alignment across energy policy, agricultural planning, infrastructure development and market creation. Clear demand signals, carbon-abatement linked incentives, residue-aggregation systems and long-term procurement structures can help channel capital toward commercially viable projects.
The bioenergy opportunity in India is no longer defined solely by producing more renewable fuel. Its future depends on building resilient markets that use existing capacity efficiently, prioritize sustainable feedstocks and create credible demand. With coordinated policy, infrastructure, certification and investment, ethanol, SAF and biomass can collectively strengthen energy security, advance decarbonization and expand economic opportunities across rural India.
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