New Delhi, September 23, 2026 (Yes Punjab News)
India’s ethanol sector is entering a phase where improving capacity utilisation is likely to take precedence over creating new capacity, with demand projected to reach 17.9 billion litres by FY31 under the base-case scenario of E25 blending, according to a Brickwork Ratings report released on Wednesday.
The report said India’s existing distillation capacity of 18.25 billion litres is sufficient to meet projected demand under both the base and bear scenarios.
Under the base case, ethanol demand of 17.9 billion litres would translate into utilisation of around 98 per cent of the existing capacity. If blending remains at E20, demand is estimated at 14.3 billion litres under the bear case, implying capacity utilisation of about 78 per cent.
However, if blending rises to E30, ethanol demand could reach 21.5 billion litres by FY31 under the bull-case scenario. This would put demand around 18 per cent above the current installed capacity.
An E30 trajectory would therefore be the point at which the sector would move from maximising existing assets to requiring fresh distillation capacity. Brickwork Ratings said the pace of blending policy is likely to remain the key factor determining incremental capital expenditure and overall sector growth.
The report also highlighted a significant shift in the industry’s feedstock mix. Grain-based routes accounted for 72 per cent of ESY26 Cycle 1 allocations, compared with 28 per cent for sugar-based routes. This marks a reversal from the 55:45 sugar-to-grain mix envisaged under the 2021 roadmap.
Maize alone accounted for 45.7 per cent of the allocations. At the same time, grain-based distilleries have faced pressure on profitability, with EBITDA margins declining from 9.2 per cent in FY21 to 6.7 per cent in FY25, reflecting higher feedstock costs.
“With E20 largely achieved and substantial capacity already in place, the sector’s focus is expected to shift towards higher utilisation, feedstock optimisation and monetisation of existing assets,” the report said.
Fresh distillation capacity is expected to become more relevant if the country moves towards E30 blending.
Brickwork Ratings maintained a stable credit outlook for the ethanol sector, citing government-administered offtake and pricing, achievement of the E20 blending mandate and a sanctioned lending base of more than Rs 420 billion to the sector by banks and financial institutions as of October 2025.
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