Transforming India’s Biofuels Opportunity Into A Global Biofuels Boom

India’s biofuel economy is at an inflection point with stars getting aligned on various growth drivers. India’s Viksit Bharat ambition will drive a unique energy transition story with growth in traditional fuels, continued dependence on energy imports while driving steady shift to sustainable energy pools. Biofuels will play a critical role in India’s energy basket, we estimate share of organized biofuels to rise from ~ 2% to ~ 5-7% of India’s energy basket, driving ~ $30- 35+ Bn market potential by 2040.

The thrust is on 4 key biofuel products – BioEthanol, Biogas, Sustainable Aviation Fuels and Biodiesel. Globally, while successful adoption of biofuels is typically related to subsidies, policy support and mandates; we believe this alone is not sufficient and product-specific nuances is critical to catalyze this ecosystem. India has inherent advantages in form of vast untapped biowaste, improving agri-supply chain, rapidly expanding infrastructure for fuels marketing and indigenous technology development.

So, what should be the game plan? The answer lies in business model & market understanding for each product.

On bioethanol, India has made successful strides with E20 likely in 2025. However, the next leg of the bioethanol story will be about adoption of 2G ethanol and potential exports. 2G Ethanol will end debate of food vs feed. Investment in 2G plants remains limited, primarily due to challenges in economic model and technology evolution. India can establish global lead in 2G technologies, enable transition and create ethanol export hubs.

Biogas has been nascent, and we believe this market opportunity will unfold in this decade. With the progressive policy changes & incentives now in place, cost economics have matured in select pockets & configuration. Demand from C&I customers is expected to pick up, supported by a maturing business case, decarbonization targets, startups in feedstock supply chain and pan India Natural gas grid penetration. India has fewer than 50 CBG plants (mostly small- scale, 5 TPD) which are expected to grow to 200-500 plants (Medium scale, 10 TPD) in next 5 years. While in the next ~15 years, there will be 2000+ plants (Large scale, 15-20 TPD), highlighting a transformative shift in India’s CBG sector.

Biodiesel blending has been well below the intent, ~0.4% against ambition of 5%, primarily constrained by challenges in domestic feedstock availability. While there are numerous small setups who operate seasonally, there is heavy dependence on imported oil seeds. Inter ministerial coordination to promote the production of oil seed feedstocks will be critical, this will take a slow and steady route to progress.
Sustainable Aviation Fuel (SAF) is a cornerstone for decarbonizing the aviation industry globally, with the potential to contribute ~65% of the sector’s emissions reductions. 1-2% SAF blending mandate for international flights by 2027-28 marks a critical first step toward mainstreaming SAF in India. Export opportunities, particularly targeting the Middle East post-2030, could further

Transforming India’s biofuels opportunity into a global biofuels boom

bolster India’s position as a global SAF hub. However, choosing the technology pathway is critical to drive investments & supporting scaling up. India has an edge in HEFA, AtJ and UCO pathways in the short – medium term & Power to Liquid (Ptl) for longer term. SAF production will require coordinated efforts to incentivize private sector participation, and market SAF for domestic & global markets.
These strategic interventions are critical to achieve Biofuels ambition. There is tremendous global and domestic interest in this sector for investments, coupled with green financing options and indigenous technology. While significant progress is still needed, India is strategically positioned to leverage these opportunities and shape the trajectory of biofuel business growth.

– Manan Shah, Partner at Kearney