National Policy on Biofuels

Overview

The National Policy on Biofuels was notified by the Ministry of Petroleum and Natural Gas (MoPNG) in 2018, replacing the earlier 2009 policy. It provides a comprehensive framework for promoting production, usage, and blending of biofuels in India. The policy was significantly amended in May 2022 to advance the 20% ethanol blending target from 2030 to 2025-26, expand the scope of feedstocks for biofuel production, and encourage the establishment of Second Generation (2G) ethanol plants across the country.

India’s Ethanol Blended Petrol (EBP) Programme, underpinned by this policy, has achieved remarkable progress — ethanol blending in petrol rose from just 1.53% in ESY 2013-14 to approximately 18-19% in ESY 2024-25, with the country achieving the 20% blending mark in October 2025. The NITI Aayog roadmap estimates India needs about 13.5 billion litres of ethanol annually by 2025-26, with about 10.16 billion litres going towards fuel blending.

Key Features of the Policy

Classification of Biofuels

The policy classifies biofuels into three categories to guide production and incentive structures:

• First Generation (1G) Biofuels: Produced from food-based feedstocks such as sugarcane juice, molasses, damaged food grains, and surplus rice. These form the bulk of India’s current ethanol production.
• Second Generation (2G) Biofuels: Produced from non-food feedstocks including agricultural residues (rice straw, wheat straw), forestry waste, municipal solid waste, and industrial organic waste. The 2022 amendment significantly expanded the list of permissible 2G feedstocks.
• Third Generation (3G) Biofuels: Produced from algae and other advanced sources. Still largely at the research stage.

Feedstock Expansion (2022 Amendment)

The 2022 amendment was a watershed change. It allowed the use of:

• Surplus food grains from FCI (Food Corporation of India) stocks for ethanol production
• Sugarcane juice and sugar syrup as direct feedstock (not just molasses)
• Damaged food grains and grains unfit for human consumption
• Expanded list of agricultural residues and waste materials for 2G ethanol

For ESY 2025-26, the government approved allocation of 52 Lakh Metric Tonnes (LMT) of surplus FCI rice for ethanol production.

Ethanol Procurement Pricing

The government fixes administered prices at which Oil Marketing Companies (OMCs) procure ethanol from producers, ensuring remunerative returns. Differential pricing exists for different feedstocks (C-heavy molasses, B-heavy molasses, sugarcane juice, damaged food grains, surplus rice, maize).

Viability Gap Funding

The policy provides for Viability Gap Funding (VGF) for 2G ethanol projects to bridge the cost gap between 1G and 2G production technologies.

Ethanol Blending Progress

India’s EBP programme has shown exponential growth:

Beyond E20 — The E30 Roadmap

Looking ahead, India’s E30 target — 30% ethanol blending in petrol — is expected to roll out between 2028 and 2030, depending on infrastructure readiness and feedstock availability. This will require further expansion of distillation capacity, flex-fuel vehicle adoption, and advancement in 2G ethanol technology.

Latest Developments

• October 2025: India achieved the milestone of 20% ethanol blending in petrol in a single month during ESY 2024-25, effectively meeting the E20 target ahead of the original 2030 deadline.
• ESY 2025-26: Ethanol producers offered 17,760 million litres for the year, significantly surpassing the OMC requirement of ~10,500 million litres, indicating surplus production capacity.
• FCI rice allocation: Government approved 52 LMT of surplus FCI rice for ethanol production for ESY 2025-26 (up to 30 June 2026).
• E30 planning: Government began evaluating the E30 (30% blending) roadmap targeting 2028-2030 implementation, with flex-fuel vehicle mandates under consideration.
• Dedicated Ethanol Corridor: Government accelerated infrastructure for ethanol storage, blending, and transportation across states with high sugarcane and grain production.

Prelims Importance

• National Policy on Biofuels was notified in 2018 and amended in 2022
• E20 target advanced from 2030 to 2025-26 by the 2022 amendment
• Biofuels classified into 1G (food-based), 2G (agricultural residue/waste), and 3G (algae)
• Ethanol Supply Year (ESY) runs from November to October (not April to March)
• Nodal ministry is the Ministry of Petroleum and Natural Gas (MoPNG)
• India achieved 20% ethanol blending in October 2025
• Ethanol blending was just 1.53% in ESY 2013-14
• OMCs (IOCL, BPCL, HPCL) are the implementing agencies for the EBP programme
• The policy allows use of surplus FCI rice, damaged food grains, and sugarcane juice for ethanol
• E30 (30% blending) is the next target, expected 2028-2030

Mains & Interview Importance

GS Paper 3 — Economy, Environment, Agriculture:

• Analyse the economic and environmental impact of India’s ethanol blending programme. How does it address the twin challenges of energy security and agricultural distress?
• Critically evaluate the food-vs-fuel debate in the context of India using surplus food grains for ethanol production. Does the policy adequately safeguard food security?
• Examine the role of Second Generation (2G) ethanol in addressing stubble burning and reducing India’s crude oil import dependence.

Interview Angles:

• “India achieved E20 ahead of schedule. But is ethanol from food grains a sustainable long-term strategy, or should we focus entirely on 2G and 3G biofuels?”
• “How does the National Policy on Biofuels balance the interests of the sugar industry, farmers, oil companies, and environmental goals?”
• “India imports 85-88% of its crude oil. Can biofuels meaningfully reduce this dependence, or are they a marginal solution?”

Sources: PIB, NITI Aayog, MoPNG