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Cabinet Raises Ethanol Price to Support Fuel-Blending Program

2025-01-30

The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, approved a price increase for ethanol, a by-product of sugar. This price hike, which applies to ethanol purchased by state-run petrol retailers from millers, will support the country's fuel-blending program and provide farmers with higher prices to offset increased cultivation costs. The program is a key initiative aimed at reducing India's reliance on imported petroleum.

For the ethanol supply year 2024-25 (November 1, 2024 to October 31, 2025), the federally set price for ethanol derived from C heavy molasses has been raised to Rs 57.97 per litre, a 2.5 per cent increase from the previous price of Rs 56.58 per litre.

The government also highlighted the significant foreign exchange savings generated by ethanol blending, estimating $14.4 billion in savings over the past decade (2014-15 to 2023-24). In 2021, the target for 20 per cent ethanol blending in petrol was brought forward to 2025-26, aiming to further reduce oil imports.

The Union government introduced a modified scheme in January 2021 to incentivize domestic ethanol production, offering lower interest loans to sugar mills for setting up ethanol-blending factories. The program guarantees ethanol buyers for these mills for the next decade, ensuring the viability of such projects.

Ethanol can also be produced from grains like rice and maize, and a portion of the blending program, previously around 3 per cent, has been grain-based. By 2025, it is estimated that nearly 6 million tonnes of sugar by-products, representing 18 per cent of total ethanol production, will be used for ethanol.

To further accelerate ethanol blending, the government is enhancing ethanol distillation capacity to 17.13 billion litres per year and establishing long-term agreements for dedicated ethanol plants in states with ethanol deficits. Efforts are also underway to increase the use of maize for ethanol production, with plans to boost output nearly tenfold within five years.

Additionally, the government is focusing on reducing the use of sugarcane-based ethanol in favour of sustainably grown maize. New research projects worth Rs 240.51 million have been approved to support this shift, including an outlay of Rs 150.46 million for the Indian Institute of Maize Research (IIMR) to increase maize production in ethanol-producing regions. IIMR is also tasked with advancing research on climate-resilient high-starch maize hybrids and scaling up the maize silage value chain.

News source: Hindustan Times