The India biofuels market, valued at USD 3.82 Billion in 2025, is set for rapid growth, projected to reach USD 15.56 Billion by 2032 at a CAGR of 22.2%.
Growth is being driven by government initiatives promoting energy security, rising crude oil import dependency, and increasing emphasis on reducing carbon emissions through cleaner fuel alternatives. Supportive policies such as the National Policy on Biofuels and Ethanol Blended Petrol (EBP) program are accelerating ethanol and biodiesel adoption, while advancements in feedstock utilization and second-generation biofuel technologies are expanding production capabilities.
The rising demand from transportation and industrial sectors, coupled with growing private sector participation and investments in bio-refineries, is further strengthening market momentum. Additionally, India’s commitment to net-zero goals and sustainable energy transition is expected to unlock significant opportunities for biofuel producers in the years ahead.
Key Takeaways
India Biofuels Market Report Coverage
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Report Coverage |
Details |
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Market Revenue in 2025 |
USD 3.82 Billion |
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Estimated Value by 2032 |
USD 15.56 Billion |
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Growth Rate |
Poised to exhibit a CAGR of 2.22% |
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Historical Data |
2020-2024 |
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Forecast Period |
2025–2032 |
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Forecast Units |
Value (USD Billion) |
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Report Coverage |
Revenue Forecast, Competitive Landscape, Growth Factors, and Trends |
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Segments Covered |
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Growth Drivers |
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Trends |
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Opportunities |
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Restraints & Challenges |
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Market Dynamics
The India biofuels market is experiencing rapid growth, fueled by rising energy security concerns, increasing crude oil import dependency, and strong government support for renewable energy adoption. The National Policy on Biofuels and initiatives such as the Ethanol Blended Petrol (EBP) program are driving ethanol demand, while blending mandates for biodiesel and expansion of biogas projects are boosting market penetration across transportation and power generation.
The market is undergoing a significant transformation with advancements in second and third-generation biofuel technologies. Investments in advanced bio-refineries, utilization of agricultural residues, and development of algae-based fuels are expanding India’s production capacity beyond traditional feedstocks like sugarcane and edible oils. Industry players are also exploring sustainable feedstock sources to align with environmental goals and reduce the food-versus-fuel debate.
In October 2024, the Indian government announced a plan under the SATAT scheme to introduce mandatory blending of Compressed Biogas (CBG) in CNG and PNG (domestic piped natural gas), phased from FY2025-26 onward. The blending obligations are: 1% in FY26, 3% in FY27, 4% in FY28, and 5% from FY29. Also, the plan includes establishing 750 CBG projects by 2028-29, involving substantial investments. This reflects the push for biogas/CBG technologies and scaling of infrastructure.
Furthermore, market growth is supported by increasing private sector participation, strategic investments by oil marketing companies, and growing demand from industrial applications such as chemicals and solvents. With India’s commitment to achieving net-zero emissions by 2070, biofuels are expected to play a pivotal role in the country’s energy transition. Despite challenges such as feedstock supply fluctuations, high production costs, and regulatory complexities, the India biofuels market is well-positioned for long-term expansion through 2032.
Market Trends
India has been rapidly increasing the ethanol blending percentage in petrol to reduce crude oil imports and enhance energy security. As of March 2025, the national average blending rate had risen to approximately 18.4%, compared to ~14.6% a year earlier, showing strong progress toward achieving the E20 target by 2025–26.
On September 1, 2025, under the Ethanol Blended Petrol (EBP) programme, policy changes were introduced to permit ethanol production from a wider range of feedstocks, including molasses, sugarcane juice, and syrup, without quantitative restrictions for the 2025/26 supply year. This regulatory flexibility is expected to improve feedstock availability, attract new investments in ethanol plants, and accelerate the pace of blending adoption across both public and private oil marketing companies.
India is shifting from food-based first-generation (1G) biofuels to advanced options for greater sustainability. Second-generation (2G) ethanol plants using crop residues like rice straw and bagasse are expanding with strong government and industry support. Sustainable Aviation Fuel (SAF) is emerging as a key priority through airline–refiner collaborations to cut aviation emissions, while the SATAT initiative is boosting Compressed Biogas (CBG) production from organic and municipal waste. Policy measures such as funding support, financial incentives, and blending mandates are fast-tracking commercialization. These efforts are positioning India as a hub for next-generation biofuels, enhancing energy security, rural incomes, and circular economy adoption.
In August 2022, Indian Oil Corporation Ltd (IOCL) inaugurated a second-generation ethanol bio-refinery near its Panipat refinery in Haryana. The plant, using rice straw (parali) as feedstock, is capable of processing about 2 lakh tonnes annually to produce around 3 crore litres of ethanol. This helps in managing crop residue, offering farmers additional income, and reducing pollution caused by stubble burning.
Market Opportunities
India is prioritizing Sustainable Aviation Fuel (SAF) as part of its long-term decarbonization strategy for aviation, one of the hardest-to-abate sectors. SAF is derived from renewable feedstocks such as agricultural residues, used cooking oil, and non-edible oils, offering up to 80% lower lifecycle carbon emissions compared to conventional jet fuel.
In July 2025, IndianOil announced that it is upgrading its diesel desulphuriser unit at the Panipat refinery (scheduled for late 2025/early 2026) to produce ~30,000 metric tons per year of SAF using used cooking oil via HEFA/co-processing technology.
Diversification beyond sugarcane into maize, broken rice, and agricultural residues presents new opportunities for distilleries and investors. Policies allowing unrestricted ethanol production from sugarcane juice, syrup, and molasses, along with new 2G bio-refineries using crop residues, are reducing feedstock risks and enabling year-round operations.
In July 2025, Maharashtra allowed its single-feed distilleries (which were earlier dependent on molasses or sugarcane juice) to also use grains—primarily maize and broken rice—for ethanol production. This enables year-round operations instead of being seasonal.
Analyst View
Recent Key Developments
Competitive Landscape
India Biofuels Market Segmentation
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