Why did Ajay Singh's video on a closed ethanol plant in Bihar go viral?

In his video post, Ajay Singh repeatedly referred to his agonising condition as the govt owned companies has stopped buying ethanol from his plant in Bihar, putting his entire business into turmoil

A few days ago, social media was agog with the impassioned plea of Ajay Singh, a businessman from Bihar, to the Centre and state governments.  In his video post, Ajay Singh repeatedly referred to his agonising condition as the government owned companies has stopped buying ethanol from his plant in Bihar, putting his entire business into turmoil. 

He said the livelihood of more than 600 workers and their families, who are employed at his ethanol plant, is hanging in the balance as one does not know when to run the plant and when not to. 

“What wrong have I committed that I believed the assurances given by the government in 2021 that the entire quantity of ethanol produced by my plant would be purchased, based on which I made the investments,” Singh said in the video. 

 

He lamented that, more than anything, what troubles him the most is that there is no one to listen to the plight of businessmen like him from anywhere. 

 

The video post went viral within minutes, eliciting comments from all corners, including academicians, fellow businessmen, politicians, and even journalists.

 

While some referred to it as symbolic of the condition of businessmen in India, others blamed the system for forcing a young entrepreneur to voice his grievance publicly.

 

So what is this assured purchase of ethanol that Singh is referring to, and what has brought about this condition where businessmen are being forced to talk about abandoning a sunshine sector that has long been seen as the cornerstone of industrial revival in Bihar?

 

If industry experts and people who matter are to be believed, the issue dates back to 2021 and is a direct fallout of surplus capacity created in India’s ethanol sector in comparison with demand from oil marketing companies (OMCs). And also the reluctance to push up blending beyond 20 per cent. 

 

Back in 2021, when India’s ethanol blending programme was still taking root, OMCs entered into long-term offtake agreements (LTOAs) with as many as 131 prospective ethanol plants.

 

These LTOAs were only with greenfield ethanol projects, and anyone who had an existing ethanol-producing unit did not qualify for signing the agreement.

 

The OMCs looked at the entire country and classified states as ethanol-deficit or ethanol-surplus, depending on their production capacities and demand.

 

For example, Uttar Pradesh was classified as an ethanol-surplus state as its production was more than demand, as were Karnataka and Maharashtra.

 

But states such as Bihar, West Bengal, Madhya Pradesh, and Assam were categorised as ethanol-deficit states.

 

As these deficit states did not have adequate ethanol-producing plants, a maximum number of plants were commissioned and approved for these states, as against those that already had a surplus.

 

The result of all this was that 27 new ethanol plants had submitted bids, of which, 17 were shortlisted for Bihar, while 23 plants were shortlisted for Madhya Pradesh.

 

Altogether, this made up 131 new ethanol manufacturing plants in India, both from sugarcane and grains. The majority of these new units were in the grains sector.

 

The LTOA signed by the five OMCs combined was for a period of 10 years and had three major clauses.

 

The first clause was 60 per cent assured buying by the OMCs of the installed capacity of a plant.

 

Experts said this meant that, suppose a plant had an installed capacity of 100 kilolitres per day of ethanol production, 60 per cent of that would be mandatorily purchased by the OMCs through tenders under the LTOA. It was kept at 60 per cent so that more players could come up to produce ethanol.

 

The second clause was that in the balance 40 per cent, LTOA signatories would get preference in OMC tenders.

 

For the next two to three ethanol supply years, everything went on smoothly and OMCs bought both the assured quantities and the preferential quantities from LTOA signatories.

 

Then, a few years ago, the Ministry of Cooperation was formed. When the ministry was set up, first preference was given to ethanol plants established in the cooperative sector for the supply of ethanol to OMCs, followed by those with whom LTOAs had been signed for assured 60 per cent buyback, and third preference on the balance 40 per cent.

 

If even after this criterion some quantity was left to be distributed, it went to non-LTOA ethanol manufacturing units.

 

This formula and system too went on for a few years without any glitch.

 

However, this went awry when, in October 2025, OMCs floated a tender for the supply of 10.50 billion litres of ethanol for the 2025–26 supply year that started in November.

 

Industry players said that in this tender, the clause for preferential treatment for the balance 40 per cent of installed capacity for LTOA companies was dropped.

 

Because of this, actual supplies of ethanol by LTOA companies in Bihar are expected to drop to just 40–50 per cent of their installed capacity, hurting them badly and forcing them to shut their plants for long durations.

 

Industry sources said the main culprit is the overall surplus ethanol capacity created in the country, with the hope that ethanol blending with petrol would go beyond 20 per cent.

 

In the October 2025 tender for supplies of 10.50 billion litres of ethanol for the 2025–26 season, bids were received for the supply of over 17.70 billion litres.

 

The bids received were far in excess of the required quantity, as insiders said OMCs estimated plant capacities based on 365 days of operation.

 

In reality, any standard ethanol plant does not run beyond 330–335 days in a year, as it requires a few days off for regular wear and tear and maintenance.

 

“If the days of operation are taken realistically at 330 days for grain and 270 days for molasses or sugarcane juice, capacity reduces by at least 10–12 per cent, that is from 17.70 billion litres to 15.65–16.00 billion litres,” a senior industry executive who has long tracked the sector said.

 

Considering that private OMCs would also have a demand of around 1 billion litres, the net quantity available for offtake by the three PSU OMCs reduces to 15 billion litres, experts said.

 

After October 2025, sources said OMCs are in the process of floating another tender for the supply of 1.50 billion litres of ethanol. This will push up their total requirement for ESY 2025–26 to 12 billion litres.

 

“A simple solution to address this surplus problem and make the plants run again would be to give allocations or purchases to all ethanol plants at 80 per cent of their annual installed capacity (12 billion divided by 15 billion), as against the current allocation that varies from 20 per cent to 105 per cent of annual installed capacities in the current ESY 2025–26,” the industry executive mentioned above said.

 

He also suggested that in the second tender to be floated by OMCs soon, ethanol plants that have already received more than 80 per cent allocation in the first tender cycle may be restricted from participating in the second cycle.

 

Bids from other bidders should also not exceed 80 per cent of their annual (365 days) installed capacity, including earlier allocations.

 

“All this will ensure that no ethanol plant in the country will have to close down due to lack of orders, and videos like the one made by Singh won’t happen again,” the official remarked.