Staring at the closure of his ethanol plant in Bihar due to low off-take, Ajay Singh, Chairman and Managing Director of Bharat Plus Ethanol, made an emotional appeal in a video posted on YouTube.
“We are in extreme pain. We are constantly trying to meet with the state and central government officials, but we are yet to achieve success,” Singh is seen pleading in the video, which was shared widely across regional and national news outlets.
The video has brought into sharp focus the precarious situation of ethanol plants across the country, many of which are struggling to find buyers for their output. Singh claims that state-run oil marketing companies (OMCs) have refused to purchase ethanol from his plant, putting at risk not just the company’s survival but also the livelihoods of those dependent on the factory.
In the first week of February, Singh announced that the ethanol plant located at Buxar in Bihar would be completely shut down. The announcement triggered widespread panic among the nearly 700 workers employed at the unit, whose livelihoods depend entirely on its operations.
Built at a cost of ₹200 crore, the Buxar plant was already operating at only half its installed capacity after OMCs sharply reduced ethanol offtake. What appears to be unfolding is a classic demand–supply mismatch.
According to a report published on February 6 by Business Standard, the roots of the problem can be traced back to 2021. The crisis was a direct fallout of surplus capacity created in India’s ethanol sector relative to demand from OMCs, coupled with the reluctance to push blending limits beyond 20 per cent.
In 2021, OMCs signed long-term offtake agreements (LTOAs) with 131 prospective greenfield ethanol projects across the country. Existing ethanol producers were excluded from these agreements, as policy focus was firmly on creating new capacity.
To streamline expansion, states were categorised as ethanol-surplus or ethanol-deficit based on production and demand. Uttar Pradesh, Karnataka, and Maharashtra were classified as surplus states, while Bihar, West Bengal, Madhya Pradesh, and Assam were identified as deficit states.
Of the 27 new bids floated, 17 were shortlisted for Bihar and 23 for Madhya Pradesh. In total, 131 new ethanol plants—predominantly grain-based—were planned nationwide.
Over time, procurement priority was revised—first favouring cooperative-sector plants, followed by LTOA signatories, and finally non-LTOA units.
The 10-year LTOAs signed with five OMCs included three key provisions: procurement assurance for 60 per cent of a plant’s installed capacity; preferential treatment for the remaining 40 per cent in OMC tenders; and additional allocations based on defined priority norms.
As per Bihar-based media reports, of the more than 100 ethanol plants proposed in the state, at least 10 operational units may be forced to shut down. This could result in the loss of over 5,000 direct jobs, with more than 70,000 people affected directly and indirectly. The crisis also threatens the livelihoods of nearly 15 lakh maize farmers, as ethanol production in Bihar is grain-based—unlike Uttar Pradesh, where sugarcane is the primary feedstock.
Kunal Kishore, Secretary General of the Bihar Ethanol Association, has repeatedly pointed out that ethanol was procured under LTOAs during 2022-23, 2023-24 and 2024-25. However, he has questioned how cooperative sugar mills suddenly became the top priority in recent tenders.
“We do not understand how cooperative sugar mills were given 100 per cent procurement assurance by OMCs, even though they have no prior long-term agreements,” Kishore has said on several occasions.
To fully understand the present crisis, it is necessary to revisit the evolution of India’s ethanol blending policy over the past two decades. In 2001, the Union Government launched pilot projects supplying 5% ethanol-blended petrol at select retail outlets, with the twin objectives of supporting agriculture and reducing environmental pollution. Successful field trials and R&D studies led to the formal launch of the Ethanol Blended Petrol (EBP) Programme in January 2003, following a resolution dated September 3, 2002, covering nine states and four Union Territories.
The programme was expanded further in November 2006, when the Ministry of Petroleum and Natural Gas extended EBP to 20 states and four UTs, directing public sector OMCs to sell 5% blended petrol as per BIS specifications.
Ethanol blending stood at just 1.53% in 2014. This rose sharply to 10% by 2022. The original target of 20% blending (E20) by 2030 was subsequently advanced to 2025 and has already been achieved in the current Ethanol Supply Year (ESY).
The EBP programme aims to enhance energy security, reduce crude oil imports, and lower emissions. It has reportedly saved over ₹1 lakh crore in foreign exchange and significantly boosted farmer incomes.
Yet the crisis unfolding in Bihar shows that while the policy may look successful on paper, many producers are struggling in reality—factories are shutting down, workers are worried about their jobs, and farmers are left uncertain about their future.
