Beyond E20: How India’s National Biofuel Policy is Reshaping Industrial Fuel and Sustainable Aviation (SAF)

Market Insights & Overview:

Biofuels are renewable fuels derived from biological sources, including plants and organic waste. Additionally, Bioethanol (an alcohol produced by fermenting sugar/starch crops) and biodiesel (derived from vegetable oils or animal fats) are two common biofuels. These fuels can provide heat and power, but are mainly used in transportation (e.g., mixed with gasoline or diesel). Furthermore, biofuels can provide a low-carbon alternative to fossil fuels, reducing greenhouse gas emissions and converting waste biomass into energy. Biofuels also generate new sources of income for the waste and agricultural sectors by utilising crop wastes, used cooking oil, and various other biomass.

The biofuels industry in India is evolving from a niche renewable sector to a key component of the nation's clean energy and transportation infrastructure. The Indian biofuel industry was valued at USD 5.82 billion in 2024. This further indicates the increasing use of sustainable fossil fuel substitutes such as ethanol, biodiesel, compressed biogas, and liquid biofuels. Research suggests this industry will grow further in the following years with the infrastructure expansion and supporting policies to improve penetration in the transportation, industrial, and rural energy sectors. Furthermore, the ethanol sub-segment, with an estimated value of USD 3.00 billion in 2025, is also a substantial contributor, driving the overall biofuel growth.

Even while biodiesel and other fuels are still less common, the demand for them is growing as blending standards change and new feedstock technologies become economically feasible. The expanding significance of biofuels in improving India's energy security, reducing transportation emissions, and generating new value streams is highlighted by this improving market landscape. This paves the path for more investment and scale-up through 2026 and beyond.

Market Growth Drivers & Emerging Trends:

• Government initiatives like the National Biofuels Policy and the Ethanol Blending Program (EBP) give manufacturers subsidies (such as tax exemptions and interest subsidies) and establish specific goals (such as E20 by 2026). Investment is further increased by support programs like KUSUM (biomass energy) and Pradhan Mantri JI-VAN (2G biofuel finance).

• Additionally, blending regulations have been driven by high oil import expenses. Every percentage increase in blending diversifies energy sources and saves foreign cash (for example, E20 may save about $4 billion a year).

• Feedstocks such as sugarcane (molasses/juice), cereals (rice, corn), oilseeds, and even garbage (used cooking oil, agricultural wastes) are abundant in India's vast agrarian economy.Recent policies have allowed using surplus food grains and FCI rice for ethanol, easing feedstock constraints. This ample biomass drives industry growth.

• Furthermore, new opportunities are created by emerging biofuel technologies, such as biogas upgrading, quick pyrolysis for bio-oil/char, and second-generation cellulose-to-ethanol facilities. In 2023, India's first commercial 2G ethanol plant went operational, and others are also being developed.

• Biofuels adhere to India's Paris commitments and reduce transportation emissions (e.g., ethanol blends reduced CO, HC, and NOx). Stricter emissions regulations (BS-VI) and rising pollution concerns are in line with the move to greener fuels.

• India is also aiming for innovative fuels in addition to ethanol and biodiesel. Emerging trends include renewable diesel (HVO) and sustainable aviation fuel (SAF). Mandates for SAF blending (1% by 2027 and 2% by 2028) will increase the biofuel demand. Additionally, interest in synthetic biofuels and bio-methane (CBG) is growing.

• Through alternative crop usage and residue use, the biofuels drive boosts farmer income and rural jobs. Also, it encourages public private partnership. 

Value Chain Mapping:

The biofuels value chain in India begins with feedstock sourcing, which forms the foundation of the entire ecosystem. For a new entrant, this stage involves identifying reliable and cost-effective raw materials such as sugarcane juice and molasses, surplus food grains like rice and maize, used cooking oil, animal fats, and agricultural residues. Feedstock is typically procured from farmers, sugar mills, food corporations, aggregators, or municipal waste collectors. Efficient aggregation, storage, and transportation are critical at this stage, as feedstock quality and logistics costs have a direct impact on overall project viability and margins.

Furthermore, raw materials are processed and converted into biofuels that may be used. This might include anaerobic digestion for compressed biogas, fermentation for ethanol, transesterification for biodiesel, and thermal processes for charcoal and bio-oil. Fuel standards compliance, quality control systems, and technology choices are all necessary at this capital-intensive stage. By using effective technologies, modular factories, or waste-based feedstocks that enhance cost economics, new entrants frequently discover opportunity here.

Blending, distribution, and end usage are covered in the final phase. Biofuels can be delivered directly to oil marketing companies, gas networks, industrial users, or agricultural markets, or they can be combined with conventional fuels. Stable revenues are ensured by robust offtake agreements, regulatory compliance, and constant quality, making downstream alliances essential to new business.

Competitive Landscape:

India's biofuels industry includes a mix of huge integrated energy companies, specialised biofuel technology corporations, sugar-sector ethanol producers, and dynamic emerging competitors. For instance, Indian Oil Corporation Limited (IOCL) is the largest energy business in India. IOCL is a major force behind ethanol and biodiesel blending programs, utilising its refineries, pipelines, and retail infrastructure to distribute blended fuels across the country with yearly revenues of over USD 90 billion.

Another major player in the public sector, Bharat Petroleum Corporation Limited (BPCL), boasts yearly sales of around USD 50–55 billion. BPCL is heavily involved in compressed biogas and ethanol projects. The brand is positioned in the centre of India's clean fuel transition due to its comprehensive approach, which includes biofuel offtake contracts, biogas plant construction, and refining. The biofuel ecosystem is further being shaped by specialised companies other than oil PSUs. Established in 1983, Praj Industries Limited is a leading engineering and bioenergy technology company located in Pune that facilitates ethanol and CBG facilities. The brand also commands a substantial portion of modular ethanol unit installations in India.

Buyofuel, a digital marketplace for ethanol supply, exemplifies how specialised enterprises leverage supply chain inefficiencies to acquire OMC contracts to drive growth. The brand generated an annual revenue of USD 12 million in 2024. Therefore, investors and companies that support India's aspirations for renewable energy may uncover a variety of access points in this dynamic market.

Opportunities for New Entrants:

• Biofuels provide a profitable entry point with blending regulations (E20 by 2025, B5 by 2030) and financial incentives. With secured pricing programs, new distilleries can get selling contracts from OMCs (Oil Marketing Company). This upward blending trajectory means demand will grow predictably.

• The demand for ethanol is expected to increase from around 698 crore litres in 2024 to 1,016 crore litres by 2026. This means almost doubling market volume in just a few years, opening space for new capacity. As objectives tighten, CBG (Compressed Biogas) and biodiesel are also anticipated to expand at the same pace.

• In India, advanced biofuels are still in their early stages. Upcoming entrants can focus on renewable diesel (HVO), bio-CNG, sustainable aviation fuel (SAF), and 2G (cellulosic) ethanol. For instance, the government's new SAF blending objectives (1–5%) suggest that by 2030, the demand for biojet fuel will be over 100 million litres annually. Since there aren't many Indian companies producing SAF or renewable diesel, early adopters gain an advantage.

• Furthermore, emerging companies can partner with the garbage and agriculture industries. For instance, establishing biorefineries close to agro-industrial centres (rice producers, sugar mills) to obtain feedstock or collaborating with local governments to manufacture biogas. Additionally, by venturing into low-cost bioethanol, companies can even export to markets like Africa and even replace imported ethanol. 

• New entrants can create digital platforms that connect biofuel producers directly to consumers, such as oil marketing companies, industrial users, and bulk transporters. These platforms enhance price discovery, lessen reliance on middlemen, and increase contracts, logistics, and procurement transparency throughout the biofuel value chain.

• Real-time tracking of feedstock supply, fuel quality, certifications, and delivery schedules can also provide lucrative entry point for an aspiring company. By integrating data analytics, blockchain, and compliance dashboards, such digital platforms can help buyers ensure regulatory adherence while allowing producers to optimise capacity utilisation and improve margins.

How Can The India Watch Help?

The India Watch can offer strategic assistance to new participants in the biofuel business. To guarantee a competitive edge and a seamless entry, our company provides data-backed market research and tactical guidance. We assist clients in making well-informed decisions by tracking market trends and interpreting governmental frameworks (such as blending mandates and subsidies). With extensive knowledge of Indian industry dynamics, we assist in data-backed decision making while mitigating supply chain and regulatory concerns.Our services include, but are not limited to:

• Market Sizing & Analysis
• Competitive Assessment & Value Chain Mapping
• Feasibility Studies & Go-to-Market Strategy
• Financial Analysis & Modelling 
• Investor Pitch Decks & Corporate Decks
• White Paper Presentations & Business reports
• Consumer Behaviour Surveys
• Business Development Strategies

Let’s explore how we can create value together. For further enquires reach out to us at:

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