E85 Fuel Launch Opens New Growth Avenue For Ethanol Producers In India

India's move towards E85-compatible vehicles could increase annual ethanol demand by nearly 21% by fiscal 2040 compared with an E20-only blending scenario, according to a report by InCred Research. The projection comes as the government has started rolling out E85 fuel through 48 retail outlets operated by public sector oil marketing companies.

What Is E85?

E85 is a fuel blend containing 80-85% ethanol and 14-19% petrol. It is designed for flex-fuel vehicles that can operate on varying ethanol blends. The ministry said the rollout is aimed at supporting wider adoption of flex-fuel vehicles and expanding India's ethanol-blending programme beyond the current E20 framework.

Demand Could Reach Nearly 30 Billion Litres By FY40

According to InCred Research, total ethanol demand could rise from 13 billion litres in fiscal 2026 to 29.63 billion litres by fiscal 2040 if E85 adoption gathers pace. Under a base-case scenario that assumes only E20 blending, ethanol demand would reach 25.74 billion litres by fiscal 2040.

That translates into additional annual demand of 3.89 billion litres, or nearly 21%, over the E20-only case. The figures are on the basis of estimates that assume petrol consumption grows at 5% annually, and flex-fuel vehicles account for 50% of new petrol vehicle demand between fiscal 2036 and fiscal 2040.

Demand growth is expected to be gradual initially. InCred estimates ethanol demand at 16.04 billion litres in fiscal 2030 under the E85 scenario, compared with 15.80 billion litres under the base case.

Industry Players Seen Benefiting

InCred Research said larger ethanol producers are likely to benefit the most if demand expands beyond the E20 programme. As per its report, companies that have already demonstrated profitable capacity growth and large-scale operations stand to gain if India's ethanol ambitions increase further.

Also, as per market analysts, stocks of the following companies could see traction following India’s ethanol expansion:

• EID Parry (India)

• Triveni Engineering & Industries

• Praj Industries

• Balrampur Chini Mills

• Shree Renuka Sugars

• India Glycols

• Globus Spirits

• Dalmia Bharat Sugar & Industries

• Uttam Sugar Mills

• Godavari Biorefineries

• Dwarikesh Sugar Industries

• Dhampur Sugar Mills

Flex-Fuel Adoption Seen Accelerating

The report projects flex-fuel vehicle penetration to increase from 1% in fiscal 2027 to 50% by fiscal 2036, remaining at that level through fiscal 2040.

If those projections materialise, E85 fuel alone could account for nearly 6 billion litres of annual ethanol demand by fiscal 2040. Overall ethanol blending levels could rise to around 23% from the present E20 framework.

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Petroleum Minister Hardeep Singh Puri said the expansion of flex-fuel vehicles and E85 usage could further raise ethanol demand, support farmer incomes, and reduce dependence on crude oil imports.

E85 is priced about ₹20 per litre lower than conventional petrol. The government expects the pricing benefit to be passed on to consumers while encouraging the use of domestically produced ethanol.

Sources:

Businessworld

CNBC TV18