The Indian government has sanctioned a substantial budget outlay of ₹4,687 crore towards interest subvention for eligible ethanol production projects. This strategic financial injection is designed to significantly boost the nation's ethanol blending program and safeguard considerable investments made in the biofuel sector.
Government Bolsters Ethanol Production
Minister of State for Petroleum and Natural Gas, Suresh Gopi, confirmed the approval in the Rajya Sabha on Monday, August 5, 2026. The funding is part of various ethanol interest subvention schemes.
- Between FY23 and July 2026 (FY27), ₹2,075 crore has already been disbursed to NABARD, with nearly the entire amount utilized.
- The government also continues to back second-generation biofuel initiatives under the Pradhan Mantri JI-VAN Yojana, offering up to ₹150 crore in assistance for commercial-scale projects.
Current Ethanol Capacity and Blending Achievements
India currently boasts 478 ethanol production plants, collectively capable of producing 2,019 crore litres annually. The distribution of this capacity across states highlights key players:
- Maharashtra: Leads with 145 distilleries and an annual capacity of 389 crore litres.
- Uttar Pradesh: Follows with 79 distilleries, contributing 344 crore litres annually.
- Karnataka: Holds 50 plants, producing 321 crore litres per year.
Public sector oil marketing companies have successfully implemented the government's E20 target, consistently blending 20% ethanol in petrol nationwide since December 2025.
Protecting Significant Investments
The Ministry of Petroleum and Natural Gas emphasized on July 10, 2026, that reverting to E10 (10% ethanol blend) would jeopardize approximately ₹1 lakh crore in annual investments. These investments, financed by public sector banks, have been channeled into dedicated ethanol plants, distilleries, storage facilities, and logistics networks to meet the country's blending targets.
“If, after creating this capacity, we were to arbitrarily revert to E10, what happens to these investments? What happens to the surplus production capacity? What happens to thousands of crores invested by farmers, cooperatives, entrepreneurs, financial institutions and public sector companies in good faith based on a national policy?” the petroleum ministry questioned, underscoring the critical importance of policy consistency.
The government's continued support through this significant interest subvention aims to sustain momentum in the ethanol sector, ensuring the viability of existing infrastructure and future projects.