Prakash Naiknavare, MD of the National Federation of Cooperative Sugar Factories Ltd (NFCSF), recently interacted with India Business & Trade (IBT) to share his insights on India’s biofuel journey. In this conversation, he highlights where India is leading, the critical gaps that need attention, and the opportunities that lie ahead for industry, farmers, and policymakers. From the evolving role of the sugar sector to the future of advanced biofuels and exports, his perspectives outline a clear roadmap for India’s transition towards a sustainable energy future.
Prakash Naiknavare: India has undoubtedly positioned itself as a global frontrunner in the biofuels journey, particularly in ethanol blending and policy frameworks. Over the past decade, we’ve seen the Ethanol Blending Programme grow from just 1.5% in 2014 to over 12% in 2024, with the E20 target for 2025 very much on track. This rapid progress has been possible because of a strong enabling ecosystem—the National Policy on Biofuels, the SATAT initiative for CBG, viability gap funding for 2G ethanol, and the interest subvention scheme for distilleries have all provided momentum. The sugar industry has transformed itself from being only about sugar to becoming integrated bio-refineries producing ethanol, CBG, power from bagasse, and even organic manure. And perhaps most importantly, biofuels have created new income streams for farmers and rural communities, embedding circular economy principles at the grassroots.
At the same time, there are areas where India needs to catch up. Advanced biofuels like 2G ethanol have been slow to scale—only four plants have been set up by OMCs and just one is currently operational, with commercial viability remaining a challenge. Similarly, the SATAT scheme has not achieved its CBG targets due to issues in feedstock aggregation and the lack of assured offtake. Biodiesel blending is still very low, collection networks for used cooking oil are weak, and algae-based biodiesel research is minimal. Infrastructure also remains a bottleneck, whether it’s in storage, blending, or biomass aggregation.
So, while the progress has been remarkable, the next step for India is to diversify its feedstock base, strengthen infrastructure, accelerate advanced biofuels, and develop a certification and export-ready ecosystem. If we can address these gaps while building on our existing strengths, India will not just meet domestic energy needs but truly establish itself as a global leader in biofuels.
Prakash Naiknavare: The sugar industry has undergone a remarkable transformation in the biofuel era, moving from a purely sugar-centric model to a multi-product bioenergy hub. What were once just sugar factories are now emerging as integrated bio-refineries. Ethanol has become a core business in its own right rather than a mere by-product, alongside the production of bio-CNG, power from bagasse, and even organic manure.
This shift is most evident in the industry’s role in the Ethanol Blending Programme. Today, sugar mills contribute more than 85% of the ethanol supplied to OMCs, with many mills operating dual-feed distilleries that process both molasses and grains. Significant investments have also been made in sustainability-focused infrastructure, such as zero-liquid discharge distilleries, spent wash boilers, and CBG units using press mud. By-products like bagasse and vinasse are being valorized for energy and soil enrichment, embedding circular economy principles into daily operations.
The impact is visible across the stakeholder chain. Farmers benefit from assured cane procurement and in some cases participate in value creation from by-products. Rural economies gain through local employment, logistics opportunities, and the multiplier effect of new revenue streams. At the national level, the industry has become the backbone of ethanol blending and a vital contributor to energy security.
Of course, challenges remain. High capital costs for advanced biofuel diversification, hurdles in obtaining environmental clearances, and the need for better market integration of CBG and 2G ethanol are real bottlenecks. Yet, the direction is clear—the sugar industry has evolved into a key enabler of India’s biofuel revolution, aligning clean energy production with rural prosperity and national priorities.
Prakash Naiknavare: Despite being the primary suppliers of feedstock, farmers often capture very limited value from the biofuel sector. Their role is largely restricted to being raw material providers, without equity or revenue-sharing models in most biofuel plants.
One of the biggest issues is the absence of an MSP for biomass. Residues such as cane trash, paddy straw, and cotton stalks have no guaranteed price, and the high cost of collection and transportation makes supply unattractive. This challenge is compounded by the lack of aggregation infrastructure—district-level collection centres equipped with balers, chippers, and storage facilities are still missing in most regions.
Payment-related bottlenecks persist as well. Even in cane-based ethanol supply chains, delays are common, and when it comes to crop residues or slurry, clear payment models have not yet evolved. Farmers also struggle with poor awareness of the opportunities that biofuels present—whether it is using digestate as an organic fertilizer or tapping into emerging carbon markets.
Finally, regulatory gaps remain. There are no targeted policy mechanisms to encourage farmer-owned CBG units, promote cultivation of energy crops, or enable farmers to benefit directly from carbon credits. Unless these barriers are addressed, farmers will continue to remain on the margins of the biofuel boom, rather than being equal stakeholders in its success.
Prakash Naiknavare: It is partially true that India’s biofuel strategy has been heavily reliant on sugarcane. In fact, until 2022–23, sugarcane was the dominant feedstock for ethanol production. However, with the government actively promoting maize, grain-based ethanol has now taken the lead—accounting for nearly 60% of total ethanol output.
That said, the bigger issue is that India still depends overwhelmingly on 1G ethanol derived from sugarcane and grains. Almost all of the progress towards E20 has come from cane syrup, B-heavy molasses, and surplus grains. This creates well-known concerns around food–fuel competition, water stress, and policy uncertainty—especially when decisions on cane diversion can disrupt investment confidence.
The real imperative is to accelerate diversification into advanced biofuels—2G ethanol, CBG/biomethane, and biodiesel. These pathways avoid food and water trade-offs, have a stronger carbon footprint, and utilize agricultural residues and waste that otherwise pose environmental challenges. Under the Pradhan Mantri JI-VAN Yojana, four 2G ethanol plants have been sanctioned by OMCs with financial support, but only the Panipat facility is currently operational.
The barriers are clear: high capital and operating costs, weak feedstock logistics, and limited market pull have made 2G ethanol commercially unviable so far. Still, research and development efforts are ongoing, and with the right policy and infrastructure push, these technologies could form the backbone of India’s next phase of biofuel growth.
Prakash Naiknavare: So far, investments of around ₹40,000 crore have gone into building ethanol production capacity in India. That figure itself tells you the confidence that industry has shown in this sector. The investment story is compelling because of three clear drivers.
First, there is a large and assured market. With the E20 blending target and SATAT programme for CBG, investors can count on long-term demand visibility. Second, the policy environment is highly supportive—from viability gap funding for 2G ethanol and interest subvention for distilleries, to emerging opportunities in carbon markets and proactive state-level initiatives. Third, biofuels have strong rural synergy. They create jobs, valorize agricultural residues and waste, and promote clean energy, which makes the sector socially and politically attractive in addition to being economically viable.
At the same time, investors must also weigh some red flags. Feedstock volatility—seasonal availability and price fluctuations—remains a real challenge. Offtake uncertainty is another, particularly in CBG, where we don’t yet have PPA-like assured procurement models. And then there are infrastructure gaps, whether in storage, blending, or transport capacity for CBG and biodiesel, or in commercially viable technology for newer areas like sustainable aviation fuel.
In short, the fundamentals of the Indian biofuel story are strong, but unlocking its full investment potential will require robust infrastructure, stable feedstock markets, and guaranteed offtake mechanisms. If these are put in place, the sector can offer one of the most attractive green energy opportunities globally.
Prakash Naiknavare: We’ve already seen some success stories—ethanol storage and blending at OMC depots is now functional largely because of coordinated planning between industry and government. But when it comes to other biofuels, the infrastructure ecosystem is still fragmented.
For example, there is no standardized storage or blending network for CBG or biodiesel. At the district level, we lack biomass aggregation centres with equipment to collect and process residues efficiently. Last-mile logistics for slurry, digestate, and other by-products are also poorly developed, which adds cost and limits adoption.
The way forward is to think in terms of integrated, future-ready infrastructure. A Biofuel Infrastructure Task Force could help drive alignment across ministries, industry players, and state governments. Piping infrastructure for CBG supply and distribution, slurry pipelines, and district-level biomass depots must be prioritized. Co-locating biofuel plants with feedstock hubs under PPP models would improve efficiency, while a biomass trading and logistics platform could provide transparency and scale.
If we can put such a system in place, it will cut costs, de-risk investments, and create the backbone for scaling advanced biofuels across the country.
Prakash Naiknavare: Absolutely—India has the potential to become a global biofuel player, particularly in ethanol, CBG, sustainable aviation fuel (SAF), and even in exporting process technologies. But the key lies in ensuring surplus production beyond our domestic E20 and CBG requirements.
We have some distinct strengths to build on: India’s multi-feedstock expertise, relatively low-cost production capabilities, and skilled engineering talent give us a competitive edge. However, there are also gaps that must be addressed—feedstock security, internationally recognized sustainability certifications, robust export infrastructure, and above all, long-term policy stability.
For Indian biofuels to compete globally, we need to scale 2G and waste-based production, align with global greenhouse gas reduction and traceability standards, and target high-value niches such as SAF and bio-based chemicals. Equally important will be export-friendly policies that provide certainty to both producers and international buyers.
If these elements come together, India can realistically position itself alongside Brazil and the US as a competitive supplier of biofuels to Asia, Africa, and the Middle East by 2030.
Prakash Naiknavare: Yes, to a large extent. India is still under-leveraging the growing private-sector appetite for low-carbon fuels. Corporates in logistics, aviation, and heavy industry are actively seeking green energy solutions, and biofuels can play a central role here. For instance, bio-CNG has clear potential for corporate fleets and logistics; biomass-based green hydrogen could serve energy-intensive sectors like steel; and sustainable aviation fuel (SAF) is an obvious fit for airlines operating from Indian hubs.
However, the enabling frameworks are not yet in place. We don’t have corporate-targeted green fuel procurement models, nor do we have fuel supply agreements (FSAs) that function like the PPAs in renewable power. Traceability and certification systems to validate carbon savings are also missing, which reduces confidence among corporates keen to demonstrate credible decarbonization.
The way forward is clear: we need standardized FSAs for biofuels, alongside robust carbon credit mechanisms that allow corporates to account for and benefit from their green fuel usage. If this gap is bridged, tapping corporate demand can diversify markets, attract fresh investment, and accelerate India’s overall green energy transition.
Prakash Naiknavare: Cooperatives can actually be game-changers in making India’s biofuel economy both inclusive and scalable. Their strength lies in aggregation, local ownership, and the ability to mobilize farmers and rural communities around shared opportunities.
At the village level, cooperatives or Farmer Producer Organisations (FPOs) can take the lead in feedstock collection and processing—whether it’s paddy straw, maize cobs, or sugarcane trash. By converting these residues into bales or briquettes, they can ensure a steady supply to 2G ethanol plants, biomass power projects, and even thermal power stations for co-firing.
Cooperatives are also well-placed to set up bio-CNG plants using cattle dung, agri-waste, and food waste, and to operate cooperative-owned dispensing stations for supplying CBG to local buses, tractors, and goods carriers. Similarly, they can organize used cooking oil (UCO) and waste oil aggregation, collecting from restaurants, canteens, and processors to feed into certified biodiesel production chains.
On a larger scale, cooperative sugar mills can be upgraded into integrated bio-refineries—producing ethanol, CBG, green electricity, and organic manure from press-mud and distillery waste. Cooperatives can also establish biomass pelletisation units to supply high-density fuel for industrial boilers and thermal plants.
The opportunities don’t stop there. Cooperatives can pool machinery like balers, shredders, and chippers for crop residue management, while training farmers in feedstock preparation, quality standards, and sustainable practices. They can also build carbon credit aggregation platforms, helping members register, monetize, and fairly share revenue from their carbon savings. Looking ahead, they could even organize dedicated feedstock supply chains for Sustainable Aviation Fuel (SAF)—a high-value niche market of the future.
In short, cooperatives can move beyond being just producers of raw material to becoming active stakeholders in the entire biofuel value chain. This not only enhances farmer incomes and rural jobs, but also strengthens India’s push towards clean energy and carbon neutrality.
Prakash Naiknavare: The real game-changer would be to mandate a minimum sub-quota for advanced biofuels—2G ethanol, CBG, waste-based biodiesel, and SAF—within the overall blending targets, backed by a guaranteed multi-year offtake price indexed to feedstock costs.
Such a step would create assured demand for non-1G fuels, giving investors the confidence to commit capital to new capacity. It would also drive diversification away from our current dependence on sugarcane and grains, thereby easing food–fuel trade-offs and water stress. Just as importantly, it would make India attractive for global capital flows, since long-term offtake and price stability reduce risks dramatically. And, because advanced biofuels are residue- and waste-based, it would also align us with international markets that increasingly demand low-carbon, traceable supply chains.
If implemented, within five years this single move could double India’s 2G ethanol and CBG output, free up 1G ethanol for exports, and position India not only as a leader in domestic energy security but also as a credible global supplier of sustainable fuels.
Prakash Naiknavare is the veteran of sugar sector having a long and fruitful association of more than 22 years. He is currently the Managing Director of India’s National Sugar Federation, an apex body representing 262 cooperative sugar mills & 9 state sugar federations across India. Prior to taking up this prestigious position, he headed the Maharashtra Coop. Sugar Federation as it’s Managing Director for 12 long years. He also had a 5 year tenure as Country Head – India of Sugar Maxx Inc. a US based MNC. Mr. Naiknavare has been closely associated with India’s sugar / sugarcane related policies. He has to his honour of having contributed in various high power committees appointed by Government of India & NABARD. Views expressed are personal.
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