Ethanol beyond E20: Why India's clean fuel plan needs a water audit

India's ethanol push is moving beyond E20, but experts say higher blending must also account for groundwater stress and regional water limits

In January 2003, India launched its ethanol blending programme to promote an alternative, cleaner transport fuel, reduce dependence on imported crude oil and create a domestic market for ethanol, particularly from the sugar sector. The mandate was for a 5 per cent ethanol-blended petrol in select states and Union territories. 

 

Cut to 2026. The country has achieved a higher target of E20 fuel and the government has proposed changes to motor vehicle rules to accommodate higher blends, including E85 and E100. The government also recently removed central excise duty on petrol blended with 22 per cent, 25 per cent, 27 per cent and 30 per cent ethanol to boost adoption.

   

But as India moves beyond E20, the story is not just only about petrol, vehicles or oil imports. It is also about water.

 

That question matters because ethanol is not produced only inside distilleries. It begins in fields with different crops, and each carries a different water footprint. A litre of ethanol at the pump may look the same, but the water behind it can vary sharply depending on the crop used, the region it comes from, and whether it is grown using rainfall, canal irrigation or groundwater.

 

Is India's ethanol roadmap accounting for water constraints?

 

Professor Anjal Prakash, faculty of public policy at FLAME University in Pune, argues that India’s ethanol plan has not yet fully internalised this constraint.

 

“India’s ethanol expansion plan has focused heavily on scaling 1G production in regions such as Maharashtra, where groundwater depletion is already a concern because of water stress. The policy framework has not integrated regional water footprint assessments, water stress mapping, or lifecycle water constraints into feedstock allocation or production targets,” he says.

 

Without these checks, he says, the roadmap risks increasing ethanol output in water-depleted zones and compounding local water stress.

 

The Central Ground Water Board’s 2025 assessment estimated annual groundwater recharge at 448.52 billion cubic metres and annual extractable groundwater resources at 407.75 billion cubic metres. The report also categorised hundreds of assessment units as over-exploited, critical or semi-critical.

 

The risk is especially high where crop incentives, power subsidies and procurement systems encourage farmers to grow water-intensive crops despite local water scarcity. In such areas, ethanol demand may become another layer of support for the same cropping pattern.

 

How much water is used for producing 1 litre of ethanol?

 

According to the 'Roadmap for Ethanol Blending in India' report by NITI Aayog and Ministry of Petroleum and Natural Gas, cultivation of sugarcane for each kg of sugar requires 1,600 to 2,100 litres of water. Hence, one litre of ethanol from sugar would roughly require 3,000 litres of water.

 

Growing 1 kg of rice needs around 4,000 litres of water. Around 2.5-3 kg of rice is needed to produce produces one litre of ethanol, which puts the overall water use at over 10,000 litres.

 

Among grains, maize is the least water-intensive crop for ethanol production, although the litre of ethanol generated per acre is lower than rice and broken rice. 

 

However, this is only at the agriculture level. Industrial refining adds to this water consumption.

 

Ethanol experts say the industrial use of water is way less than what is used in fields. 

 

Former bureaucrat Abinash Verma, a leading figure in the ethanol industry who also served as the DG of the Indian Sugar Mills Association (ISMA), says critics often confuse water used inside ethanol plants with water used in agriculture.

 

He explains that a 100-kilolitre-per-day (100 KLPD) plant would produce 100,000 litres of ethanol daily and is allowed by Environment Ministry to draw a maximum of 400,000-450,000 litres of fresh groundwater daily. The plant’s total daily requirement is higher, but a large part is recycled. 

 

“We require almost about 1.1 million litres of water daily for a 100 KLPD plant, on an average. The balance of about 650,000-700,000 litres is recycled water from the previous days,” he says. So the net fresh water usage is only 4 litres per litre of ethanol produced.

 

This distinction is central to the industry’s position. The distillery may directly use only a few litres of fresh water to produce a litre of ethanol. But the larger water footprint lies upstream in growing sugarcane, rice or maize.

 

Sugarcane’s water burden

 

Sugarcane has been central to India’s ethanol scale-up because the sugar industry already has the milling and distillery ecosystem needed to convert cane derivatives into ethanol. But sugarcane is also one of the crops most frequently cited in India’s water debate.

 

Prof Prakash says sugarcane-based ethanol must be assessed against the water stress of the region where the crop is grown. “For instance, sugarcane or rice milling residue is being used for ethanol production, and this is extremely water-intensive. Sugarcane alone requires about 2,500 litres of water per kilogramme of production,” he says.

 

The geography also matters. Maharashtra, Karnataka and Uttar Pradesh are major cane-producing states. In some cane belts, groundwater stress, rainfall variability and irrigation pressure are already concerns.

 

Rice and surplus stocks

 

Rice adds another layer to the debate. The government has made it compulsory for the grain-based ethanol plants to ensure that 40 per cent of their raw material has to be surplus Food Corporation of India (FCI) rice for ethanol production. The policy has helped distilleries access feedstock and supported blending targets, but Verma says the industry prefers to use maize or rejection/broken rice. 

  For Verma, the use of rice for ethanol must be understood in the context of surplus grain. “India produces 150 million tonnes of rice every year. We are the largest rice producer,” he says.

 

According to him, India's domestic consumption for rice is around 100 million tonnes and exports account for another 20-22 million tonnes, leaving a large surplus of 30 million tons of unsold rice every year. He argues that ethanol producers are helping absorb broken and rejected rice that may not be fit for human consumption.  

  But the water-stress question does not disappear because the rice is surplus, damaged or broken. The water was still used to grow it. If policy creates a long-term market for rice-based ethanol, it needs to ensure that it does not further entrench paddy cultivation in groundwater-stressed regions.

 

Why type of feedstock matters

 

India’s ethanol supply is still dominated by first-generation, or 1G, ethanol. This is produced from sugar- and starch-based feedstocks such as sugarcane juice, molasses, sugar, rice, damaged grain, broken rice and maize. Second-generation, or 2G, ethanol is produced from cellulosic and lignocellulosic biomass such as rice straw, corn straw and other agricultural residues. 

 

While 2G ethanol can reduce pressure on water-intensive feedstocks, the current blending programme still relies more on 1G ethanol as its production technology is commercially mature. 

(Image created using GenAI)

 

Prakash says 2G ethanol is promising, but cannot be treated as a near-term answer for very high blending targets.

 

“Second-generation ethanol can help bridge this gap, but not at the scale or speed that we need for E85,” he says. 

 

He explains that 2G ethanol can be produced from sources which are less water-intensive than sugarcane and do not compete directly with food crops. But scaling remains difficult. 

 

“The first is high capital cost and low commercial viability. The vehicles we have at the moment are not E85-compliant. I think only Maruti has come up with a WagonR that is compliant. Also, 2G plants require about two to three times more investment than 1G plants, and operating costs remain very high without strong subsidies,” he says.

 

The second issue, he says, is limited operational capacity, with only a handful of plants and many not running at full capacity. The third is logistics.

 

“Collecting, storing, and transporting scattered residues is costly and technically challenging,” Prakash says.

 

This is particularly relevant in India, where agricultural residues are dispersed across small and fragmented landholdings. The same decentralisation that makes crop residue burning difficult to solve also makes residue-based ethanol logistically demanding.

 

Even with policy support, Prakash says, 2G ethanol may account for only about 5 per cent to 10 per cent of total ethanol production by 2030. "To reach E85, India would need to scale ethanol production at least three to four times beyond the current level, which means 2G alone cannot achieve that without massive infrastructure investment and technological breakthroughs," he says.

 

What a water audit should measure

 

The strongest case for a water audit is that not all ethanol has the same water cost. 

 

Prakash says water availability should be central to fuel and feedstock policy. A water audit, he says, should start with water footprinting.

 

“First, there should be water footprinting. That means we have to understand the lifecycle water use per litre of ethanol. This could include irrigation and transportation for each feedstock,” he says.

 

The second requirement is regional water stress mapping. “This means overlaying ethanol production zones with groundwater depletion areas. This data is very readily available. Active soil stress also has to be mapped, and rainfall variability data should also be plotted,” Prakash says.

 

The third is feedstock water allocation rules. “That means there should be criteria for which feedstocks are allowed in each water zone. For instance, sugarcane could be restricted in depleted aquifers. This has to be taken into policy decisions,” he says.

 

The fourth is lifecycle analysis, including upstream crop growth and downstream processing. The fifth is monitoring and compliance through real-time water-use tracking, annual reporting and penalties for exceeding thresholds.

 

Would industry accept a water audit?

 

Verma says the industry has no reason to oppose a water audit if it is framed correctly.

 

“How can the sugar industry be blamed for using surplus rice, maize, or surplus sugarcane to produce ethanol? The blame is somewhere else. We need to find a solution on the farm side to help use water more efficiently,” he says.

 

That position is important because it shifts the audit debate away from a narrow inspection of distilleries. If the objective is water security, the audit cannot stop at the factory gate. It must track the full chain: crop, region, irrigation source, feedstock movement, processing water, recycling, and final ethanol output.

 

The way forward

 

For now, E20 has already made a dent in India’s fuel mix. The next leap, whether E25, E30 or beyond, will require a sharper sustainability test.

 

“The future has to be planned based on these assessments and scientific evidence. At the same time, policy support has to be very effective to take it forward,” Prakash says.

 

The fuel pump will show the blend. The water audit will show the cost behind it.