Need roadmap, storage and pricing reform to drive green fuels: Industry urges government

India’s transport and energy stakeholders have called for an urgent, long-term national roadmap, market-linked pricing reforms and major investments in storage and distribution infrastructure to accelerate the country’s shift to low-carbon fuels like ethanol, bio-CNG and hydrogen.

During a discussion on decarbonising road transport with ethanol on September 12, 2025 at the India Sugar & Bio-Energy Conference, industry leaders, policymakers and original equipment manufacturers warned that without policy clarity beyond 2030, India risks losing the momentum it has built through the rapid scale-up of ethanol blending.

India’s current storage capacity for blended fuels stands at around 800 million litres, up from 180 million litres, as reported in a 2021 NITI Aayog study, but the annual consumption is now at 1,200 crore litres.

“With the changing pattern, storage capacities have to increase, because we have to maintain stocks,” said Anurag Saraogi, executive director, biofuels at Bharat Petroleum Corporation, underlining the logistical complexity of managing shifting ethanol blends (E5, E10, E15, E20) across regions.

Reji Mathai, director of ARAI, said decarbonising energy offered far greater emissions cuts than just efficiency gains.

“When the goal is clear that by 2070 you have to attain Net Zero, there has to be steps taken. The alternative solution for certain cases has been very easy, just like for gasoline, it was a very good synergy with ethanol. But we are still having certain challenges with diesel. The government is looking at one alternative called isobutyl alcohol with better properties than ethanol for diesel blending,” he said.

He added that bio-CNG will be “a key game player”, while 2G ethanol and green hydrogen remain cost-intensive and need efficiency breakthroughs.

2G ethanol or second-generation ethanol is a type of biofuel produced from non-food biomass such as agricultural and forestry waste (rice straw, sugarcane bagasse, corn cobs) or energy crops. Unlike 1st generation ethanol, which uses edible crops like corn or sugarcane, 2G ethanol production utilises waste materials, thereby reducing competition with food sources, minimising food waste and addressing environmental issues like stubble burning.

Automakers echoed the need to move from technology tweaks to energy decarbonisation.

“Today, we have already achieved E20. Beyond that, we are talking about E85. When we go to E85, it is 79 per cent lower CO2. E100 is carbon neutral. If you look at CBG, it is carbon negative. So, that’s the power of decarbonising energy,” said Anoop Bhat, executive officer of Maruti Suzuki India Ltd. 

He noted E20 already cuts emissions by 14.3 per cent, and shifting millions of CNG vehicles to bio-CNG could be a “force multiplier”.

A sugar miller highlighted how India’s sugarcane productivity has grown 18 per cent in 15 years, compared to 3 per cent globally, driving ethanol growth.

“We started working on a better variety of sugarcane with the positive policies of the government in 2-3 years, we have already reached much beyond the E20 level,” Aditya Jhunjhunwala, managing director of KM Sugar Mills said, warning: “For decarbonisation, we need to have a roadmap."

Another sugar industry representative added: “If we have a roadmap where you support sugarcane ethanol, then that would uncork almost 1.25 billion litres from the sugar sector itself.”

However, industry executives cautioned that 2G ethanol from agri-residue remains costly and small-scale. “2G will still be very small in terms of output. 2G technology is a very high-cost, high capital setup compared to 1G. 2G plants need Rs 1,500 crore versus Rs 50 crore for 1G. 1G will be extremely heavy in the mix,” said one of the above executives.

They stressed that India must shift from administered ethanol pricing to a market-determined regime. “If you look at Brazil, the pricing is 30 per cent lower than petrol. People will not buy these vehicles unless pricing is attractive,” Bhat said.

“In India, we need to first develop a market. Once we achieve the level of maturity, the market-determined pricing of energy will become easier, same way as gasoline deregulation happened around 2014,” said PS Ravi, director (downstream), Federation of Indian Petroleum.

Industry leaders also flagged tax anomalies disincentivising flex-fuel and hybrid vehicles, urging a level playing field.

“GST for hybrid vehicles reduced to 18 per cent but other vehicles have gone to the bracket of 40 per cent. If that could be brought to the right platform, then it’s a more level playing field,” Vedang Pittie of Harinagar Sugar Mills said.

Calling for coordinated action, Mathai urged: “One of the key things we should not miss is how to keep on improving the efficiency part. My request is to bring in the efficiency aspect in manufacturing to move more and more towards Net Zero.”