India's ISMA seeks up to $2.2 billion budget support for SAF and 2G ethanol projects

India's sugar industry body, the Indian Sugar & Bio-Energy Manufacturers Association (ISMA), has sought government budget support of $1.66–2.2 billion (Rupees 15,000–20,000 crore) to accelerate investments in advanced biofuels, including second-generation (2G) ethanol and sustainable aviation fuel (SAF), as the sector faces surplus production and mounting pricing pressure.

ISMA Director General Deepak Ballani said the association has requested around $1.1 billion for 2G ethanol projects and about $170 million for SAF capacity, with the broader outlay aimed at supporting pilot projects, new technologies and equipment innovation in the upcoming Union Budget.

The push comes as India's sugar industry heads toward a high-production year, with output estimated at around 34.3 million mt, well above last year's levels. While production has been strong, Ballani said excess supply has weighed on ex-mill prices, threatening mill viability.

Ethanol diversion, a key mechanism for balancing sugar stocks, has also fallen short of expectations this season. ISMA estimates ethanol allocation at around 2.9 billion liters, or 766 million gallons (290 crore litres), compared with industry expectations of nearly 4.5 billion liters, or about 1.19 billion gallons (450 crore litres), leaving higher sugar inventories and additional pressure on prices.

Ballani said ex-mill sugar prices in some regions have begun to fall below the cost of production, while cane costs have continued to rise. The fair and remunerative price (FRP) for sugarcane has increased to Rupees 355 per quintal, up nearly 30% from 2018–19 levels, while the minimum support price (MSP) for sugar has not been revised over the same period.

ISMA has also sought revisions to ethanol pricing, noting that raw material accounts for 70–75% of ethanol production costs, while ethanol prices have not kept pace with rising cane prices, impacting distillery margins.

India achieved its 20% ethanol blending (E20) target ahead of schedule, but surplus capacity remains a concern. Total ethanol capacity across sugar and grain-based distilleries is estimated at around 20 billion liters, or about 5.28 billion gallons (2,000 crore litres), compared with roughly 11 billion liters, or about 2.91 billion gallons (1,100 crore litres) required for E20.

To address this, ISMA has called for a roadmap beyond E20, including higher blending levels, flex-fuel vehicles, ethanol-diesel blends and SAF. The association has also urged GST rationalisation, seeking lower tax rates on flex-fuel vehicles, ethanol fuels and ethanol production machinery to stimulate demand and investment.

ISMA said targeted policy support for advanced biofuels could help stabilise the sugar sector, support farmer incomes and contribute to India's clean energy and emissions reduction goals as global aviation and transport sectors increase focus on low-carbon fuels.

The Asian ethanol market was mixed on Jan. 16. The fuel grade experienced an increase, while the industrial grade price held steady.

The Asian fuel ethanol marker was up $1/cu m day over day at $536.33/cu m CIF Philippines on Jan. 16, tracking movement in the US futures.

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