Industry participants said the country is considering exporting ethanol to neighbouring countries, including Nepal, Bangladesh, and Indonesia, which have 10% ethanol blending targets but lack adequate feedstock and distilling capacity. “We are seeking ethanol exports, because that would help in the interim period to move out some surplus from the country,” said Bharti Balaji, deputy director general, The All India Distillers’ Association (AIDA). “There are many countries that have opened up 10% mandate, including Nepal, Bangladesh, Indonesia, etc. Exporting surplus ethanol will help in the temporary period all the distilleries.”
India’s ethanol production capacity has crossed 20 billion litres a year, with another 4 billion set to come onstream this fiscal year, CareEdge Ratings said in a May report.
Demand, however, hasn’t kept pace. The government’s E20 blending programme absorbs only around 11 billion litres a year, and non-fuel users – liquor makers, pharmaceutical companies, and chemical manufacturers – consume another 3-3.5 billion litres. That leaves nearly 7 billion litres unused capacity.
The strain is showing up on factory floors, with distilleries operating at about 60% capacity. Analysts are expecting 65-75% utilisation over the next three years. Maharashtra, a major ethanol hub, is expected to bear the brunt of the regional glut. To be sure, the entire ethanol output doesn’t get converted into fuel. Nearly 18.7% of demand comes from undenatured ethanol used in Indian Made Foreign Liquor (IMFL), country liquor, pharmaceuticals, and laboratories. The related extra neutral alcohol (ENA) market reached about 3.8 billion litres in 2025 and is growing around 5% annually, fuelled by consumers shifting from country liquor to IMFL. Ethanol and ENA also feed into antiseptics, vaccines, antibiotics, cosmetics, detergents, and hand sanitizers – a category expanding 9-11% annually. Exports of first-generation ethanol produced from sugarcane, maize, or grain are currently barred, per the Grain Ethanol Manufacturers Association of India.
Only second-generation ethanol from crop residue and biomass got export clearance, and that too only in September 2025. Non-fuel-grade ethanol exported by India goes mostly to African markets like Tanzania, Angola, and Kenya, and small volumes to Iraq and Nepal. Nepal itself is weighing a 10% blending mandate but currently lacks the feedstock and distilling capacity, and talks are extending to the broader SAARC region.
Praj Industries managing director Ashish Gaikwad is betting on a different fuel entirely-bio-isobutanol, which he said is ready for commercial scale-up, with the first order expected this quarter. “Our bio-isobutanol (Bio-IBA) technology is ready for commercialisation and scale-up, and we expect the first order in the current quarter of FY27,” Gaikwad told ET.Mumbai | New Delhi: For years, India’s ethanol story was about scaling up fast enough to meet ambitious blending targets. But now the script has flipped-the country is producing far more ethanol than it can consume, and the search is on for new markets to keep capacities afloat. This, even as India’s E20 rollout has sparked growing consumer backlash.
Industry participants said the country is considering exporting ethanol to neighbouring countries, including Nepal, Bangladesh, and Indonesia, which have 10% ethanol blending targets but lack adequate feedstock and distilling capacity. “We are seeking ethanol exports, because that would help in the interim period to move out some surplus from the country,” said Bharti Balaji, deputy director general, The All India Distillers’ Association (AIDA). “There are many countries that have opened up 10% mandate, including Nepal, Bangladesh, Indonesia, etc. Exporting surplus ethanol will help in the temporary period all the distilleries.”
India’s ethanol production capacity has crossed 20 billion litres a year, with another 4 billion set to come onstream this fiscal year, CareEdge Ratings said in a May report.
Demand, however, hasn’t kept pace. The government’s E20 blending programme absorbs only around 11 billion litres a year, and non-fuel users – liquor makers, pharmaceutical companies, and chemical manufacturers – consume another 3-3.5 billion litres. That leaves nearly 7 billion litres unused capacity.
The strain is showing up on factory floors, with distilleries operating at about 60% capacity. Analysts are expecting 65-75% utilisation over the next three years. Maharashtra, a major ethanol hub, is expected to bear the brunt of the regional glut. To be sure, the entire ethanol output doesn’t get converted into fuel. Nearly 18.7% of demand comes from undenatured ethanol used in Indian Made Foreign Liquor (IMFL), country liquor, pharmaceuticals, and laboratories. The related extra neutral alcohol (ENA) market reached about 3.8 billion litres in 2025 and is growing around 5% annually, fuelled by consumers shifting from country liquor to IMFL. Ethanol and ENA also feed into antiseptics, vaccines, antibiotics, cosmetics, detergents, and hand sanitizers – a category expanding 9-11% annually. Exports of first-generation ethanol produced from sugarcane, maize, or grain are currently barred, per the Grain Ethanol Manufacturers Association of India.
Only second-generation ethanol from crop residue and biomass got export clearance, and that too only in September 2025. Non-fuel-grade ethanol exported by India goes mostly to African markets like Tanzania, Angola, and Kenya, and small volumes to Iraq and Nepal. Nepal itself is weighing a 10% blending mandate but currently lacks the feedstock and distilling capacity, and talks are extending to the broader SAARC region.
Praj Industries managing director Ashish Gaikwad is betting on a different fuel entirely-bio-isobutanol, which he said is ready for commercial scale-up, with the first order expected this quarter. “Our bio-isobutanol (Bio-IBA) technology is ready for commercialisation and scale-up, and we expect the first order in the current quarter of FY27,” Gaikwad told ET.