India’s drive to blend 20 percent ethanol into petrol by 2025–26 and thereby achieving green future represents a critical step toward reducing oil imports, cutting greenhouse gas emissions, and supporting rural incomes. Initially, sugarcane and surplus rice were the primary feedstocks for ethanol production—so-called first-generation (1G) biofuels. However, mounting evidence shows that reliance on these food crops is neither sustainable nor scalable. From falling sugarcane yields and water scarcity to concerns over diverting staple grains, it’s clear that India must look beyond sugar and rice. Second-generation (2G) ethanol—made from agricultural residues like rice straw—offers a far more sustainable path. Companies such as Khaitan Bio Energy are leading this transition, demonstrating how innovative technologies can convert farm waste into clean fuel while protecting food security and the environment.
Why Sugar-Based Ethanol Is Losing Steam
For over a decade, India’s ethanol blending program for green future depended heavily on sugarcane, using both molasses and cane juice. Yet recent trends have exposed serious constraints:
- Declining Yields: Poor monsoon rains, disease outbreaks (e.g., red rot), and soil exhaustion have cut sugarcane output from 315.4 lakh tonnes in 2023–24 to 257.4 lakh tonnes in 2024–25.
- Water Intensity: Producing one litre of sugarcane ethanol can require up to 2,860 litres of water—unsustainable in water-stressed regions like Maharashtra and Uttar Pradesh.
- Price Sensitivity: Global sugar price fluctuations directly affect ethanol economics. When sugar prices rise, mills divert less cane to ethanol, threatening blending targets.
- Geographical Limits: Sugarcane cultivation and associated distilleries are concentrated in a few states, creating transport bottlenecks and uneven blending infrastructure across India.
Together, these factors mean sugar-based ethanol alone cannot meet India’s growing fuel-blending targets without jeopardizing water resources, crop incomes, and the reliability of ethanol supply.
The Rice Diversion Dilemma
To diversify, the government approved the use of Food Corporation of India (FCI) rice for ethanol. In May 2025, an additional 2.8 million tonnes of FCI rice were sanctioned—bringing total rice allocation to 5.2 million tonnes for the 2024–25 ethanol supply year Down To Earth. While this move helped boost ethanol output—enough to produce roughly 2.45 billion litres—diverting rice poses serious risks:
Food Security
Rice is a staple food for a large part of India’s population. Diverting millions of tonnes of it toward ethanol production could threaten food availability, especially in years when harvests are lower than usual. This diversion could lead to price hikes, making rice less affordable for many, and increasing the risk of food insecurity in vulnerable communities.
Supply Chain Strain
Increased demand for rice to produce ethanol puts pressure on India’s well-established food procurement and distribution systems. These systems are vital for delivering subsidized food to millions of people. Using large quantities of rice for fuel could disrupt these networks, causing logistical bottlenecks and reducing the efficiency of food delivery mechanisms.
Policy Backlash
The use of food grains like rice for fuel has triggered concern among both the public and policymakers. It raises ethical and strategic questions about prioritizing fuel over food. This ongoing debate highlights the urgent need for more sustainable and non-food-based alternatives, such as second-generation ethanol from agricultural waste like rice straw for a green future.
The rice-for-fuel strategy is a stopgap at best. Long-term energy security demands feedstocks that spare the country’s precious food reserves.
Why 2G Ethanol from Rice Straw Makes Sense
Second-generation (2G) biofuels use non-food biomass—lignocellulosic residues such as rice straw, wheat straw, corn stover, and forestry waste. Rice straw stands out for several reasons:
- Abundant Raw Material: India generates an estimated 168 million tonnes of rice straw annually, with 39–47 million tonnes available as surplus Down To Earth.
- Stubble Burning Mitigation: Farmers routinely burn rice straw to clear fields, causing severe air pollution. Converting straw to ethanol reduces this practice and its health hazards.
- No Food Competition: Rice straw is a waste product, so its use for fuel does not compromise food availability.
- Rural Livelihoods: Purchasing straw for ethanol gives paddy farmers an extra income stream, boosting rural economies.
By tapping into rice straw, India can scale ethanol production without the drawbacks of sugarcane or rice grain feedstocks.
Comparing Ethanol Feedstocks
| Feedstock | Food vs. Fuel | Water Use | Annual Availability | Environmental Impact |
| Sugarcane Molasses | Low food impact | Very high | 32 lakh tonnes ethanol | High water stress; fertilizer runoff; limited to certain states |
| FCI Rice Grain | High food impact | Moderate | 5.2 million tonnes rice | Diverts staple grain; risk of food shortages |
| Rice Straw (2G) | No food impact | Low | ~40 million tonnes | Reduces stubble burning; uses agricultural waste; low water footprint |
Benefits and Challenges of 2G Ethanol
Benefits:
- Sustainability: Utilizes waste; avoids food-fuel conflicts.
- Emission Reductions: Cuts open-field burning and greenhouse gases.
- Economic Uplift: Creates new markets for farm residues; spurs bio-refinery jobs.
Challenges:
- Technology Complexity: Lignocellulosic biomass requires advanced pre-treatment and enzymes to release fermentable sugars.
- Higher Capital Costs: 2G bio-refineries need greater upfront investment than 1G plants.
- Logistics: Collecting, transporting, and storing bulky straw feedstocks demands robust supply chains.
The chart shows a balanced view of key advantages like environmental benefits, rural income support, and emissions reduction, along with notable challenges such as high setup cost, technological complexity, and supply chain issues.
Overcoming these issues requires targeted policy support, technology partnerships, and financing models that de-risk investment in 2G infrastructure.
Khaitan Bio Energy’s Game-Changing Role
Khaitan Bio Energy has emerged as a pioneer in India’s 2G biofuel landscape focussing green future. It has patented technology to produce 2G Ethanol using biomass with zero discharge from the biorefinery. The main features of the technology are:
- Integrated, Zero-Liquid-Discharge (ZLD) Design: Efficient water recycling and minimal effluent generation.
- Advanced Pretreatment: Energy-efficient reactors and enzymatic hydrolysis processes maximize sugar yield from tough rice straw fibers.
- Byproduct Valorization: Extracted silica and lignin are used for steam generation, enhancing plant economics and sustainability.
- Local Farmer Engagement: Contracts with paddy growers ensure a reliable straw supply, boosting rural incomes and reducing stubble burning.
By combining cutting-edge technology with circular-economy principles, Khaitan Bio Energy demonstrates how 2G ethanol can be both environmentally and commercially viable.
Policy and Investment Imperatives
To scale 2G ethanol from rice straw nationally, coordinated action is needed:
- Incentives for Feedstock Supply: Minimum purchase prices for straw and grants for collection infrastructure.
- Capital Subsidies: Loan guarantees and viability gap funding for 2G plant developers.
- Research & Development Support: Grants for process optimization and enzyme cost reduction.
- Blending Mandate Flexibility: Progressive blending targets that recognize the longer ramp-up for 2G capacity.
Such measures will encourage more private and public players to enter the 2G ethanol space, accelerating India’s green-fuel transition.
The Road Ahead
India’s ethanol blending journey must evolve from its 1G origins to embrace multi-feedstock strategies centered on sustainability. Rice straw–based 2G ethanol addresses the twin challenges of energy security and agricultural pollution. With innovators like Khaitan Bio Energy leading the charge—and with the right policy ecosystem—India can meet and exceed its 20 percent blending goal without compromising food supplies or natural resources.
The shift to 2G ethanol is not just a technological upgrade; it’s a systems change that empowers farmers, protects public health, and strengthens India’s energy sovereignty. By leveraging abundant agricultural residues, the country can chart a truly green and resilient energy future—one straw at a time.