India Biofuels Market SIZE AND SHARE ANALYSIS - GROWTH TRENDS AND FORECASTS (2023 - 2030)

India Biofuels Market Analysis

India biofuels market size was valued at US$ 2.56 Bn in 2023 and is expected to reach US$ 10.31 Bn by 2030, growing at a compound annual growth rate (CAGR) of 22% from 2023 to 2030. Biofuels are fuels produced directly or indirectly from organic material (biomass) including plant materials and animal waste. The primary biofuels are ethanol and biodiesel which are used as transportation fuel. Biofuels in India are used to supplement traditional fossil fuels and help address energy security and environmental challenges. The key growth drivers for India biofuels market include government support and policies, rising energy demand, environmental benefits, and rural development.

India biofuels market is segmented by feedstock, application, and technology. By feedstock, the market is segmented into ethanol, biodiesel, biogas, and others. Ethanol is expected to dominate the market over the coming years. Ethanol is predominantly used in India for blending with petrol

India Biofuels Market Drivers:

• Government Policies and Initiatives: The government of India has introduced several policies and initiatives to promote biofuels, which is driving the growth of India biofuels market. Several financial incentives like interest subventions, tax exemptions etc. have been provided for 2G ethanol projects. The government has also mandated BIS specifications for higher ethanol blends including E12 and E15. These policies create a conducive environment for the growth of biofuels market in India. For instance, on February 1, 2023, the Indian government introduced several policies and initiatives to promote biofuels. One such policy is the "National Policy on Biofuels (2022 Amendment)" published by the Ministry of Petroleum and Natural Gas in June 2022.
• Focus on Reducing Crude Oil Imports: India is heavily dependent on crude oil imports to meet its energy needs. The rise in crude oil prices and India's increasing oil import bill is a major concern. Biofuels provide an alternative to reduce dependence on imported fossil fuels. The government plans to achieve its ethanol blending targets to supplement gasoline requirements. Biodiesel utilization in the automotive, industrial, and marine sectors also reduces diesel consumption. The use of biofuels aligns with India's objectives to enhance energy security and reduce the burden of oil imports. For instance, in 2022, the U.S. imported an average of six million barrels of crude oil per day, with Canada accounting for more than half of the U.S. oil imports

India Biofuels Market Opportunities:

• Emerging Advanced Biofuels: There are emerging opportunities for advanced biofuels produced from non-food feedstocks like agricultural residues, municipal waste, algal biomass, etc. These second and third-generation biofuels are more sustainable solutions that do not create a fuel vs food challenge. Companies are developing technologies to produce cellulosic ethanol from agri-waste. The use of municipal solid waste to produce bioCNG via biomethanation also holds promise. As these technologies mature, advanced biofuels could unlock new potential for growth.
• Export Potential: India has the opportunity to boost foreign exchange earnings by tapping into export markets for biofuels. There is an established export demand for ethanol in Europe and Asia due to stringent biofuel blending mandates. Biodiesel exports can be scaled up. Engineering firms are also exporting biofuel technologies overseas creating scope for growth. Developing export-oriented biofuel production will benefit the Indian economy and support the vision of self-reliance.

India Biofuels Market Restraints:

• High Production Costs: A major restraint for biofuel adoption is their high production cost compared to conventional fuels. Ethanol production requires large amounts of feedstock and energy input for biomass processing. Capital costs for commercial plants is also high. Biodiesel production has high chemical and separation costs. Under-developed supply chains add to logistics costs. Unless production economics improve through technological innovations, scale etc. costs will remain a concern.
• Infrastructure Bottlenecks: Lack of adequate storage and distribution infrastructure for ethanol and biodiesel blends is a key bottleneck. Oil marketing companies are enhancing supply logistics but gaps exist. Constraints like limited tankage, pipelines, and dispensers need addressing for smooth last-mile connectivity. Upgraded logistics and new assets compatible with corrosive biofuels are required for their increased penetration. Infrastructure limitations affect the ecosystem.

Analyst Viewpoint:

India biofuels market has significant growth potential over the next decade. The government's focus on promoting ethanol blending with gasoline presents a major driver for the market. According to Economic Research Service. The recent increase in the ethanol blending mandate from 5% to 20% by 2030 will substantially increase ethanol demand. Several states like Uttar Pradesh and Karnataka are expected to dominate ethanol production due to abundant sugarcane availability.

However, low availability of feedstock and competing demand from the sugar industry may pose challenges. Erratic monsoons and limited irrigation facilities affect the availability of sugarcane and other feedstocks. There is also a risk of higher food prices if feedstock is diverted from the food chain to fuels. Setting up large distillation units and supply infrastructure will require major capital investments.

Nevertheless, the initiative to exploit non-food biomass sources like agricultural residues and sugarcane pulp presents new opportunities. This can help alleviate feedstock shortage issues. The market is also poised to expand beyond ethanol. Biodiesel demand is expected to grow driven by the use of waste cooking oil as a feedstock. Advances in research on second-generation technologies will further broaden the feedstock base.

In conclusion, while the biofuels industry faces challenges, significant growth looks set over the long run given the country's push for clean energy and environmental goals.

India Biofuels Market Trends

• Improving Ethanol Economy: There is a clear growth trend towards an improving ethanol economy in India. Ethanol production capacity has rapidly increased from less than 2000 Milllion litres per annum in 2013 to a projected 10,000 million litres by 2025. More than 50 new distilleries are expected to be setup for grain/molasses-based ethanol production. OMCs are investing in supply infrastructure for ethanol blending. Higher ethanol blends like E15 and E20 will be introduced in more locations. The ethanol economy ecosystem is expanding enabling usage.
• Second-Generation Biofuels: Second-generation biofuels from agricultural wastes and residues are gaining traction globally and in India. Most of the new ethanol bio-refineries being established are based on lignocellulosic biomass feedstocks like rice straw, bagasse, wood biomass, etc. Biodiesel production from non-edible oils is also rising. Several technology providers are offering process technologies for 2G biofuels tailored for Indian biomass sources. 2G biofuels are emerging as a viable sustainable option.
• Biogas Growth: Biogas is witnessing increasing adoption driven by India's focus on waste management and organic fertilizers under the SATAT initiative. Biogas is produced from agricultural residues, cattle dung, municipal solid waste, etc. via anaerobic digestion. Biogas is used for electricity generation and as a transportation fuel in the form of bio-CNG. The number of biogas plants being set up is rising driven by facilitative policies and the supply of wet organic wastes. Biogas holds promising growth prospects.
• Emerging New Feedstocks: Research is ongoing to develop and commercialize new advanced biofuel feedstocks with better efficiency and sustainability. Algae biofuel development is gaining attention given its higher yield potential while also recycling CO2. Biofuels from municipal solid wastes and plastics using techniques like pyrolysis are also being explored. Agricultural processing wastes like rice bran, cashew apple, etc. also hold potential for biofuel conversion. Feedstock diversification will support the continued evolution of biofuels.

Figure. India Biofuels Market Share (%), By Region

Recent Developments in India Biofuels Market

India Biofuels Market Segmentation