MC Explains | What is 2G ethanol and why is India aiming to increase its production?

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26 Aug, 2025 12:21

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On World Biofuel Day on August 10, Prime Minister Narendra Modi dedicated to the nation a second generation (2G) ethanol plant, the first in the country, at Panipat in Haryana.

In his address during the event, PM Modi said that in the last seven-eight years, the country has saved Rs 50,000 crore in forex outflows by blending ethanol with petrol. He also said that this plant will provide a permanent solution to the problem of stubble burning on farms.

So, what exactly is this 2G ethanol and why is the government keen to increase its production in India?

First, the science

Ethanol, an organic chemical compound, is a renewable fuel made from various plant materials that are collectively referred to as biomass. The first generation (1G) ethanol is manufactured from feedstock such as cereals, sugarcane juice and molasses as raw materials, while 2G ethanol plants utilise surplus biomass and agricultural waste to produce ethanol.

Ethanol blending

Ethanol, when blended with petrol, reduces carbon dioxide emissions. For India, it also helps move closer to its goal of energy security, as it boosts the volume of auto fuel and reduces, to that extent, dependence on oil imports.

India achieved its target of an average of 10% blending across the country five months in advance in June this year. Subsequently, the government amended the National Biofuel Policy, 2018, which, among other things, advanced the ethanol blending target of 20% in petrol to 2025-26 from 2030 earlier. In an attempt to boost biofuel production, the government has also made amendments to include more feedstock for their production.

How will promoting ethanol blending help?

Besides reducing emissions, ethanol blending, especially with 2G ethanol, has other benefits. It will provide farmers a lucrative option to dispose of the stubble without burning it, which has been aggravating pollution levels every year. It provides an end-use for the agri-crop waste and can become a source of additional income for farmers. The ethanol manufacturing units will also create jobs across the value chain.

Slow start for 2G ethanol

The manufacturing of 2G ethanol got off to a slow start. Way back in 2016-17, state-run oil marketing companies (OMCs) had announced plans to set up a total of 12 plants but the first of these was commissioned by Indian Oil Corporation Ltd (IOCL) only this month.

IOCL built the first 2G ethanol plant at an estimated cost of over Rs 900 crore. The unit will use about two lakh tonnes of rice straw annually to generate around three crore litres of ethanol every year. According to the company’s annual report for 2021-22, it is also setting up a third generation (3G) ethanol plant at Panipat of capacity 128 kilo litres per day (KLPD) based on the gas fermentation technology of LanzaTech (LT) of USA.

Bharat Petroleum Corporation Ltd (BPCL) is setting up an integrated 2G and 1G bio-ethanol refinery at Bargarh in Odisha. The refinery will increase the production capacity to about 6 crore litres per annum of ethanol. It has a design production capacity of 100 KLPD of 2G ethanol using biomass as feedstock and 100 KLPD of 1G bio ethanol using rice grain as feedstock. BPCL is also expanding its ethanol storage facility in all its depots and terminals in a phased manner to cater to the additional requirement on account of 20 percent blending rollout by 2025.

Hindustan Petroleum Corporation Ltd (HPCL) is constructing a 2G ethanol bio-refinery plant of 100 KLPD capacity at Bathinda in Punjab. The company has plans to build four plants to produce ethanol using damaged or surplus grains, such as maize and rice.