India’s biofuel moment

The global energy map is no longer defined by markets alone-it is shaped by conflict, coercion, and control. Oil and gas have become instruments of geopolitical leverage, not just economic exchange. From tensions in the Middle East to sanctions and supply disruptions, energy flows today are as political as they are physical.
For India, this reality carries a steep cost. The country imports over 85 per cent of its crude oil and more than half of its LPG. Every global price spike feeds directly into inflation, widens the current account deficit, and strains public finances. Energy insecurity is no longer a distant risk-it is a recurring economic shock.
Yet, hidden within this vulnerability is a strategic opening. India’s biofuel sector-ethanol, compressed biogas (CBG), and biomass-has reached a turning point. What was once a policy experiment is now a credible pillar of energy strategy. The question is no longer whether biofuels can work. It is whether India can scale them fast enough-and smartly enough-to matter.
India’s ethanol blending programme is one of its most notable clean energy achievements. Blending has risen from just 1.5% in 2014 to 20% in 2025-well ahead of schedule. Production capacity has expanded rapidly to nearly 17-18 billion litres annually.
But success has exposed a new fault line. Demand for E20 blending stands at roughly 10-11 billion litres. In effect, a significant share of installed capacity risks lying idle. This is not a failure of supply-it is a failure to expand demand in parallel. If left unaddressed, this mismatch could weaken investor confidence and slow future growth. India has built capacity. It must now create markets. If ethanol represents progress, compressed biogas represents potential.
India currently has over 130 operational CBG plants producing around 900 tonnes per day. While this demonstrates technical viability, it is a fraction of what is possible. India consumes 31-32 million tonnes of LPG annually-more than half of it imported. At current levels, CBG meets well under 1 per cent of this demand.This gap is not due to a lack of feedstock or technology. It is a function of policy ambition and infrastructure readiness.
CBG can substitute LPG in commercial kitchens, small industries, and transport segments. It can reduce import dependence, create rural income streams, and address waste management challenges. What it lacks is not utility-but scale.Brazil’s biofuel journey offers a useful lesson in what policy clarity can achieve.
With ethanol blending levels of 27-30% and widespread use of flex-fuel vehicles, Brazil created a stable ecosystem where farmers, fuel suppliers, and automakers operate with aligned incentives. Consumers can switch between fuels based on price, and investors can plan with confidence.
The underlying principle is simple: long-term certainty unlocks long-term capital.
India now needs a similarly clear roadmap beyond E20-one that signals direction, not hesitation. India’s ethanol push has not been without criticism. Concerns around food security, water use, and efficiency have been raised across sectors. These are important issues and deserve careful policy design. But the larger picture is often overlooked. At 20% blending, ethanol has already reduced crude oil imports, saved valuable foreign exchange, and cushioned the economy against global price volatility. In a world where energy markets are increasingly unstable, this is not just an environmental gain-it is economic resilience.Ethanol is not merely a blending component. It is a strategic buffer.
To fully realise the potential of biofuels, India must move beyond incremental progress to deliberate scale. This requires a coordinated push across policy, infrastructure, and markets.
First, demand creation must become central. Mandating partial substitution of LPG with CBG-particularly in commercial and industrial segments-can create immediate and predictable demand. Second, infrastructure gaps must be addressed. Investments in compression, storage, and distribution networks are essential to make CBG commercially viable at scale.
Third, policy incentives must reward environmental performance. Linking biofuel production to carbon markets can unlock additional revenue streams and improve project economics.
Fourth, India must expand the scope of ethanol beyond petrol blending. Its use in aviation fuels, industrial applications, and even cooking energy can significantly increase demand.
Finally, a clear roadmap beyond E20-towards E27 and higher-along with accelerated adoption of flex-fuel vehicles, can provide the long-term certainty investors seek. India’s biofuel programme has already delivered measurable benefits-lower imports, cleaner energy, and enhanced rural incomes. But its true potential lies ahead.Without demand expansion, surplus ethanol will remain underutilised. Without scaling CBG, dependence on imported LPG will persist. Without policy clarity, investment will hesitate.
Energy security cannot be outsourced; it must be built domestically and at scale. Biofuels offer India a chance to turn agricultural strength into energy resilience and reduce external vulnerability. In an increasingly weaponised energy world, biofuels are not just an alternative — they are strategic insurance.
The writer is the Founder Director, IFGE, and Public Policy Expert on Infrastructure, Bio Fuels & Sustainable Mobility; views are personal















