Executive Summary
India is rapidly accelerating its biofuel adoption as part of its dual agenda of energy security and climate commitments. With fossil fuel import dependence crossing 85% for crude oil and 50% for natural gas, biofuels have emerged as a critical lever to diversify the energy mix, reduce the trade deficit, and lower carbon emissions in hard-to-abate sectors.
Recent policy actions signal both near-term demand creation and medium-term structural transformation:
- Compressed Biogas (CBG) – The SATAT initiative continues to gain traction, with new offtake agreements by oil marketing companies (OMCs) and policy clarity on CBG blending with natural gas.
- Ethanol Blending – The E20 target has been advanced to ESY 2025-26, requiring rapid scaling of feedstock availability, distillery capacity, and infrastructure.
- Sustainable Aviation Fuel (SAF) – India has initiated pilot projects for SAF production and refinery readiness, opening high-value opportunities.
These developments are transforming the value chain, from farmers to logistics companies. The next few years will determine how India balances growth with sustainability while positioning itself globally in the biofuel sector.
India’s Net Zero Vision and the Role of Biofuels
Contribution to Energy Security, Rural Economy, and Decarbonization
Energy Security
- Reduction in Fossil Fuel Imports: Biofuels help decrease India’s import bill and strengthen energy security.
- Diversification of Energy Sources: They reduce dependency on global oil price fluctuations.
Rural Economy
- Income for Farmers: Biofuel feedstocks generate additional income.
- Job Creation: Cultivation, processing, and distribution create rural jobs.
Decarbonization
- Lower Emissions: Biofuels reduce greenhouse gas emissions.
- Support Renewable Targets: They complement India’s clean energy initiatives.
Why Biofuels Are Central to the 2070 Net Zero Target?
- Decarbonizing Transportation: Ethanol, CBG, and SAF significantly cut transport emissions.
- Energy Security: Domestic biofuels reduce import dependence.
- Rural Development: Biofuels stimulate rural economies.
- Renewable Integration: They offer scalable, sustainable alternatives.
Current Status of Biofuels in India
1. Ethanol Blending Rates
- 2014 blending: 1.5%
- 2021 target of 10% achieved
- 2023-24 blending: 14.6%
- 2024-25 supply year: 19.3%
- July 2025 blending: 19.05% (peaks up to 19.9%)
India is close to achieving its E20 (20%) target ahead of 2025.
2. Ethanol Production & Capacity
- Installed capacity 2025: 1,700-1,820 crore litres/year
- Actual supply 2023-24: 707 crore litres
- Feedstocks expanded to: B-heavy molasses, sugarcane juice, grains, damaged food grains, maize, surplus rice.
3. SATAT / Compressed Biogas (CBG)
- SATAT target: 5,000 plants producing 15 million tonnes per year
- Plants commissioned: 75–110
- LoIs issued: ~2,200
- 2023-24 CBG sold: 19,700 tonnes
4. Sustainable Aviation Fuel (SAF)
- IOC Panipat refinery: 30,000 tonnes/year SAF by 2026
- Delhi IGI Airport pilot logistics trials
- Indicative SAF targets: 1% by 2027, 5% by 2030
5. Key Takeaways
- Ethanol close to 20% blending target
- SATAT strong interest but slow commissioning
- SAF entering pilot & refinery readiness stage
Technology Pathways for Biofuels in India
1G Ethanol
- Produced from sugarcane juice, molasses, and grains
- Main driver of blending program
2G Ethanol
- Uses residues like rice straw, corn cobs, bagasse
- Prevents stubble burning
Bio-CNG (CBG)
- Produced via anaerobic digestion
- Replaces LPG & CNG
- Key part of SATAT
Sustainable Aviation Fuel (SAF)
- Made from used cooking oil, waste fats, biomass
- Produced via HEFA, ATJ, FT pathways
Feedstock Availability & Value Chain
1. Sugarcane, Grains & Rice
- Sugar output expected to fall from 31.5 MMT to 25.7 MMT
- Government restricted cane juice & B-molasses for ethanol
- Shift to grains & surplus rice (FCI allocated 5.2 MMT in 2024-25)
2. Agricultural Residues & Waste
- India generates 500–550 MMT of crop residues annually
- CBG and 2G ethanol help reduce stubble burning
3. Logistics & Supply Chain Challenges
- Storage, seasonal residues, limited infrastructure
- High transport cost beyond 100 km
- Rice diversion raises food security concerns
Market Outlook & Demand Projections
Ethanol (E20)
India needs 10–11 billion litres annually to meet E20 by 2025–26.
CBG (SATAT)
Goal: 15 billion SCM by 2030.
SAF
Demand expected: 1.5 million tonnes by 2030.
Risks & Challenges
- Food vs Fuel: Could raise food prices
- Technology scale-up: 2G & SAF still expensive
- Financing challenges: Long payback, investor hesitation
- Regulatory uncertainties: Global mandates vary
Opportunities for Industry & Investors
1. Ethanol
- Market to grow from $6.5B (2023) to $10.45B by 2029
- Strong policy incentives
- Major players: Renuka Sugars, Balrampur Chini, Triveni Engineering
2. Compressed Biogas (CBG)
- 100+ plants operational under GOBARdhan
- Rising private investment
3. Sustainable Aviation Fuel (SAF)
- Global demand rising rapidly
- India preparing refinery & airport readiness
4. Public-Private Partnerships (PPP)
- Crucial for infrastructure and scaling
- Help accelerate policy implementation
India’s Biofuels Policies & Investments
1. National Policy on Biofuels
- 20% ethanol blending target by 2025
2. PM JI-VAN Yojana
- Supports 2G ethanol plants
- ₹1,970 crore allocated
3. GOBARdhan Scheme
- Promotes CBG plants
4. SATAT Scheme
- Encourages CBG production
5. State Level Initiatives
- Punjab: green hydrogen pilot
- Gujarat: whey ethanol projects
- Karnataka: biofuel promotion
6. Global Biofuels Alliance (GBA)
- Launched at G20 2023
- India a key member