KPMG: India Must Move Beyond E20 to Build a Resilient Ethanol Ecosystem

India's ethanol sector is entering a new phase of development following the nationwide operationalisation of 20 per cent ethanol blending, with a fresh report from KPMG in India calling for a strategic repositioning of ethanol as a foundational pillar of the country's transport energy architecture.

The report, titled Ethanol: Beyond E20 – Repositioning Ethanol as India's Transport Energy Backbone, outlines how India must now transition from large-scale programme creation to system-level optimisation, encompassing feedstock diversification, infrastructure alignment and stronger policy coherence.

From Blending Mandate to Energy Lever

Having achieved the E20 milestone ahead of schedule, KPMG's analysis suggests that sustaining momentum will require moving beyond first-generation (1G) sugar-based ethanol pathways. The report places particular emphasis on scaling second-generation (2G) ethanol derived from agricultural residues, as well as expanding the use of alternative feedstocks such as maize, to reduce pressure on food supply chains and ensure a more stable, diversified supply base.

Anish De, Global Head of Energy, Natural Resources and Chemicals at KPMG International, said the programme demonstrated how aligned policy frameworks and industry coordination could meaningfully reduce import dependence. He added that the sector must now move toward "system intelligence," repositioning ethanol as a foundational component of a resilient and future-ready transport fuel ecosystem.

Infrastructure and Policy Gaps to Address

The report identifies several structural challenges that must be addressed as India advances to higher blending levels. These include expanding storage and distribution infrastructure toward multi-grade systems, improving supply chain logistics and enhancing transparency and coordination across the ethanol value chain.

On policy, the report calls for pricing mechanisms to evolve toward a more market-responsive framework, which it considers central to long-term investor confidence and sector viability.

Sustainability at the Core

Beyond energy security, the report underscores the importance of embedding sustainability considerations across the ethanol value chain. It draws attention to lifecycle emissions, water use efficiency and resource intensity as factors that must be managed carefully to ensure production growth remains aligned with India's broader environmental objectives.

The report concludes that progress in the next phase will depend on the coordinated development of supply, infrastructure and demand ecosystems — with feedstock diversification, evolved pricing frameworks and improved system-level visibility identified as the critical enablers of a more resilient and sustainable ethanol sector.