What Happened
- India's ethanol blending programme has emerged as a powerful tool for rural economic transformation, aligning agricultural policy with clean energy objectives.
- India achieved 20% ethanol blending in petrol (E20) in 2025, five years ahead of the original 2030 target.
- Farmers have earned over Rs 1 lakh crore through ethanol procurement since 2014, with OMC purchases expected to pay farmers approximately Rs 40,000 crore in 2025 alone.
- Over 200 distilleries have been established, creating rural jobs and agro-based industrialisation in states like Uttar Pradesh, Maharashtra, Bihar, and Punjab.
- The programme has led to a reduction of 544 lakh metric tonnes of CO2 emissions and saved approximately Rs 1.36 lakh crore in foreign exchange through reduced crude oil imports.
Static Topic Bridges
Ethanol Blending Programme (EBP) -- Policy Framework
India's Ethanol Blending Programme was initiated in 2003 with a modest 5% blending mandate. The National Policy on Biofuels (2018, amended 2022) set the roadmap for 20% ethanol blending by 2025-26 (advanced from 2030). The Biofuels Policy categorises biofuels into First Generation (1G -- from food crops like sugarcane, maize, rice), Second Generation (2G -- from agricultural residue, municipal waste), and Third Generation (3G -- from algae). India achieved E20 in 2025. The government has now set a target of 27% blending (E27) by 2028.
- EBP timeline: 5% mandate (2003) --> 10% target (2017) --> 20% achieved (2025) --> 27% target (2028)
- National Policy on Biofuels: 2018 (original); 2022 amendment advanced E20 target to 2025-26
- Administered price of ethanol: Rs 65.61/litre (sugarcane juice route); Rs 56.28/litre (C-heavy molasses)
- Nodal ministry: Ministry of Petroleum and Natural Gas
- Ethanol procurement: through Oil Marketing Companies (IOC, BPCL, HPCL) via open tenders
- Inter-Ministerial Committee: oversees ethanol availability, pricing, and allocation
Connection to this news: The EBP's success in achieving E20 five years early demonstrates the effectiveness of policy alignment -- combining agricultural support (MSP for sugarcane, ethanol pricing), industrial incentives (distillery expansion loans), and environmental goals (emission reduction mandates).
Sugarcane Economy and Farmer Income Linkages
India is the world's largest producer of sugarcane (approximately 450 million tonnes, 2024-25) and second-largest sugar producer (approximately 320 LMT). The sugarcane pricing mechanism uses Fair and Remunerative Price (FRP), determined by CACP and notified by the government. Several states also declare State Advised Prices (SAPs) higher than FRP. The ethanol programme has diversified the revenue stream for sugarcane farmers and sugar mills -- mills can now produce either sugar or ethanol from sugarcane juice, reducing the cyclical boom-bust pattern of the sugar industry.
- Sugarcane FRP (2025-26): Rs 340 per quintal (at 10.25% recovery rate)
- Major sugarcane states: Uttar Pradesh (approximately 38% of production), Maharashtra (approximately 22%), Karnataka (approximately 12%)
- Sugar mills in India: approximately 520 operational mills
- Ethanol feedstock diversification: sugarcane juice, B-heavy molasses, C-heavy molasses, maize, broken rice, surplus food grains
- Sugar season: October to September
- Cane arrears problem: historically, sugar mills owe farmers unpaid dues; ethanol revenue has reduced arrears significantly
Connection to this news: Ethanol production from sugarcane juice and molasses has fundamentally improved the economics of sugar mills, enabling them to pay farmers more promptly and reducing the chronic problem of cane payment arrears that had plagued the sector for decades.
Biofuel and Climate Change Mitigation
Biofuels contribute to climate change mitigation by displacing fossil fuels. The UNFCCC recognises biofuels as a tool for reducing greenhouse gas emissions in the transport sector. India's updated NDC (August 2022) includes a target of 45% emissions intensity reduction by 2030 (from 2005 levels) and 50% non-fossil fuel power capacity by 2030. The transport sector contributes approximately 14% of India's total GHG emissions. Ethanol-blended petrol produces 20-25% fewer lifecycle CO2 emissions compared to pure petrol.
- CO2 reduction from EBP: 544 lakh metric tonnes cumulative (up to 2025)
- Forex savings: approximately Rs 1.36 lakh crore saved through reduced crude oil imports
- E20 emission reduction: approximately 20-25% lower lifecycle CO2 per litre compared to pure petrol
- India's NDC: 45% emissions intensity reduction by 2030; net zero by 2070
- Transport sector GHG share: approximately 14% of India's total emissions
- 2G ethanol plants: IOCL Panipat (100 KLPD from rice straw), BPCL Bargarh (under commissioning)
- National Green Hydrogen Mission (2023): Rs 19,744 crore; complements biofuel strategy for transport decarbonisation
Connection to this news: The ethanol programme demonstrates a successful model of linking climate action with rural development -- reducing India's oil import dependency and carbon emissions while simultaneously creating farmer income and rural employment.
Key Facts & Data
- Ethanol blending achieved: 20% (E20) in 2025; next target: 27% (E27) by 2028
- Farmer earnings from ethanol: over Rs 1 lakh crore since 2014
- CO2 emissions reduced: 544 lakh metric tonnes (cumulative)
- Forex savings: approximately Rs 1.36 lakh crore
- Distilleries established: over 200 across rural India
- Sugarcane production: approximately 450 million tonnes (world's largest)
- India's crude oil import dependency: approximately 89%
- Ethanol feedstocks: sugarcane juice, molasses (B-heavy, C-heavy), maize, broken rice, agricultural residue