With blending targets met ahead of schedule, industry urges Budget 2026 to unlock new demand through SAF, E100 infrastructure, and high-value bio-based manufacturing.

As deliberations around Union Budget 2026 intensify, industry leaders are calling for a decisive recalibration of India’s biofuel policy—from a singular focus on blending targets to a broader, demand-driven bioeconomy strategy. While India’s ethanol blending programme stands as a rare example of policy execution ahead of schedule, stakeholders caution that success has also ushered in a new challenge: surplus ethanol capacity that risks becoming a structural inefficiency without timely demand-side intervention.

The early achievement of E20 ethanol blending marks a defining inflection point for the sector. It reflects the effectiveness of coordinated policymaking, investment incentives, and industry participation. Yet, with blending ceilings effectively reached in the road transport segment, the sector now faces the limits of a volume-led approach. Incremental ethanol demand from automotive fuels alone may no longer be sufficient to absorb existing and upcoming capacity, underscoring the urgency of identifying new, scalable consumption pathways.

Dr. Sangeeta Srivastava, Executive Director, Godavari Biorefineries Ltd. (GBL), stressed that Budget 2026 must serve as a pivot—from celebrating blending milestones to enabling the next phase of bio-industrial growth.

“Having successfully achieved E20 blending ahead of schedule, India now faces a productive surplus that requires urgent demand-side policy innovation. Budget 2026 should focus on incentivizing E100-ready infrastructure and accelerating the mandate for Sustainable Aviation Fuel (SAF) to absorb this additional ethanol capacity. A strategic shift toward ethanol-to-chemicals and high-value bio-based derivatives is essential. This budget must provide the fiscal framework to transition from fuel blending to a global leadership role in the sustainable chemical economy.”

Industry observers note that Sustainable Aviation Fuel (SAF) and ethanol-to-chemicals represent not merely alternative outlets, but structurally superior demand anchors. Both pathways align closely with India’s long-term climate commitments, energy security objectives, and aspirations to emerge as a competitive global manufacturing hub. SAF, in particular, offers a rare convergence of decarbonisation necessity and market inevitability, as global aviation faces mounting regulatory and investor pressure to reduce emissions.

At the same time, ethanol-to-chemicals enables a decisive move up the value chain—transforming ethanol from a fuel additive into a foundational feedstock for low-carbon chemicals, advanced materials, and bio-based intermediates that serve global markets. These segments promise higher margins, longer investment cycles, and deeper industrial linkages than fuel blending alone.

However, industry leaders warn that the absence of clear mandates, offtake certainty, pricing mechanisms, and fiscal incentives could delay this transition, leaving capacity underutilized and capital stranded. Budget 2026, they argue, must therefore go beyond incremental allocations and articulate a coherent demand-side framework that de-risks early investments in SAF and advanced bio-refining.

With global demand accelerating for low-carbon fuels, sustainable chemicals, and bio-based alternatives, stakeholders believe the upcoming Budget represents a critical opportunity to reposition India—from a volume-driven ethanol producer to a value-led bioeconomy leader, capable of shaping international supply chains rather than merely supplying them.

— Suchetana Choudhury (suchetana.choudhuri@agrospectrumindia.com)