Indian ethanol producers are targeting alternative markets including domestic and African industrial buyers to draw down surplus stock after national oil companies bought less than expected for gasoline blending.
India's ethanol surplus has worsened because private distillers increased production capacity on expectations of a more rapid rise in India's ethanol blending mandate. Many built dedicated ethanol plants, distilleries, storage facilities and logistics networks to meet India's blending targets. Public sector banks have financed nearly 1 trillion rupees/yr ($10bn/yr) of investments in ethanol production and associated infrastructure, according to the oil ministry.
National oil companies have maintained their national ethanol procurement levels, but the build out has caused the number of bids in tenders issued by oil marketing companies (OMCs) to exceed national fuel requirements, so oil companies have significantly reduced quotas from individual facilities.
For individual distilleries, this has resulted in losses after significant investment in ethanol plant expansions, a Delhi-based ethanol producer said.
VINP Distilleries and Sugars, a dedicated ethanol plant in Karnataka that which sells fuel ethanol exclusively to state-run OMCs under contract, filed a lawsuit in late 2025 after its ethanol production quota was reduced by 58pc from its bid of 93mn litres to 39mn litres after OMCs issued a tender for 10.5bn litres for Ethanol Supply Year (ESY) of 2025–26. The Karnataka High Court on 16 June ruled in favour of VINP Distilleries and ordered OMCs to honour their contractual agreements. But the Supreme Court of India has stayed this order after an appeal by state-run Bharat Petroleum (BPCL).
Producers are now relying on sales in the spot market. This includes targeting domestic industrial-grade buyers who had bought less US imports than usual because of higher prices. Argus assessed delivered ethanol cfr Mumbai prices at close to a two-year high of $830/t in early May, while US prices also rose sharply on the back of the announcement of record-high domestic blend targets. Increased freight costs due to the outbreak of the US-Iran war also supported higher prices on a cfr basis. But prices have cooled recently, mirroring declines in US ethanol prices. Argus-assessed Mumbai CFR was last priced at $720/t.
Indian ethanol producers are left with limited avenues to sell their surplus product overseas. The government forbids the export of fuel ethanol produced from food crops, while Indian exports of undenatured bulk industrial ethanol remain uncompetitive in global markets due to the use of resource-intensive feedstocks such as sugarcane and maize.
Turning to Africa
African nations such as Ghana and the Ivory Coast are emerging destinations for Indian ethanol. The continent requires extra-neutral alcohol (ENA)-grade ethanol to sustain its beverage industry, as well as its cosmetics and pharmaceutical sectors.
Flows from India this year have increased significantly from minimal volumes in previous years, a Karachi-based Pakistani trader said. These volumes are competing with Pakistani supply.
Pakistani volumes to Africa increased since the European Commission suspended tariff-free access to Pakistan's ethanol exports to the 27-nation bloc on 20 June 2025. Traders have since also shifted their focus building new export markets in Asia such as South Korea and Japan.
Shipments to Africa are sent in drums rather than bulk tanks because of limited opportunities to find return cargoes. Drums, once emptied, can be reused at the destination and are more economical.
Offers for Indian ENA in ISO tanks delivered to the African coast are currently as low as $0.62/litre including the drum cost, a Ghana-based Indian ethanol trader said. Similar Pakistani ENA ISO tanks are priced around $0.80/litre.
Karachi's ethanol shipments to Africa have been affected by the Middle East war, Pakistan's ethanol manufacturer Hunza Sugar Mills' head of trade Rizwan Hussain said, attributing higher drum rates to increased delivered ethanol prices.
Pakistan has been unable to lower its prices to compete with Indian drums because it does not have an established polymers manufacturing industry and relies primarily on raw materials from the Middle East to produce drums. Supplies of these raw materials have been severely affected by the conflict in the Middle East.
But cheaper Indian prices could be seasonal. OMCs are expected to issue their next major ethanol procurement tender in September. This, together with tightening supplies as the market moves into the off-season production period, is likely to support prices and divert supplies towards meeting domestic demand.
This may make Pakistani ethanol more competitive, although the cyclical nature of pricing between India and Pakistan will repeat over time, Hussain said. Other Pakistani participants were also sceptical on whether this was a temporary phase or a lasting shift.
India has been preparing to raise its fuel blending mandate through several policy developments. A potential higher mandate would enable better utilisation of domestic capacity and support ethanol prices for local producers.
