How to Start Ethanol Production Business in India?

In today’s article, we will give you complete information about how to start ethanol production business in India. Like, what are the benefits of doing this business? What would be the requirement in this? What kind of licence do you need for this? How much will its initial setup cost you, and how much income can you generate from it?

What is the demand of India ethanol market?

Ethanol is mainly being used for blending with petrol. Right now, about 7.5% ethanol is being mixed with petrol in our country. But the government has set a target of 20% blending in petrol by 2025. That is, by 2025, 20% ethanol and 80% petrol will be used in vehicles.

Apart from this, 80 to 100% blending is being done in countries like Brazil. It means that many vehicles are running only on ethanol, and due to this, their dependence on crude oil has also reduced a lot. From this, you can guess how much scope this business has.

The government is also aggressively promoting ethanol production. Because this will reduce our crude oil imports, our foreign reserves can also be saved. For this, the government is also introducing many subsidies and schemes.

Also, to promote local production of ethanol, the government has banned the blending of ethanol imported from abroad with petrol.

Our raw materials for the production of ethanol are mainly agricultural produce or agricultural waste, thanks to which the farmers also get some extra income and waste management is also done.

Government Support in Ethanol production business

So, now talking about the government’s support in this business, to promote the local production of ethanol, the government has also fixed the minimum rate of ethanol produced from different raw materials separately.

What is the cost of 1 litre of ethanol?

For example, the rate of ethanol made from C-heavy molasses is 45 rupees/liter. The rate of ethanol made from B heavy molasses has been fixed at 57.61 and that of ethanol made from sugarcane juice at 62.65.

All of these ethanol rates have been kept separate because they use different raw materials to produce different types of ethanol, and the yield of each ethanol is also different.

Apart from this, as I told you at the beginning of the article, the government is accepting only locally produced ethanol for blending with petrol and has banned imported ethanol from foreign sources to blend with petrol, so that the local production will get a further boost.

The government has also reduced the GST on ethanol from 18% to just 5% and approved the free movement of ethanol for the ethanol blended programme by amending the Industries Act 1951.

How to get government support for the ethanol production business?

Apart from this, the government is also giving you a one-year monotorium on the bank loan taken for your ethanol production and an interest subvention of up to five years. But the condition for availing yourself of this interest subvention will be that at least 75% of your ethanol production should go to OMCs, i.e., oil marketing companies like IOCL, BPCL, and HPCL.

For this reason, every year in August and September, government oil companies take out tenders for ethanol, whose purchase rate is already fixed by the government.

Here, you have to submit only technical information and the quantity of ethanol requested in this tender. If you sell ethanol to OMCs through this tendering process, you will get payment within 21 days of supply.

How do I start my own ethanol business?

Ethanol production machines

Now, let’s talk about ethanol production machines and sections of your plant. First of all, you will have a distillation section. After that, your fermentation section, then your boiler section, then your turbine section.

Then you have to make a raw material storage section and a finished product storage section. In this section, you will also have to use a motor turbine, a high-pressure boiler, and this type of big machine.

Raw Materials to start ethanol production business in India

Second, when discussing raw materials in this process, four types of raw materials are primarily used to produce ethonal.

The first one is C-heavy molasses.

This will give you 250–275 litres of rectified spirit, i.e., the ethanol produced in about one ton.

Next is the raw material, which is B-heavy molasses.

which will give you about 300 to 325 litres of rectified spirit in one tonne of raw material.

The third is the use of sugar cane waste as a raw material for ethanol production.

You will get about 70 to 80 litres of rectified spirit from this one material.

And finally, you can also produce ethanol using cereal, which will give you 300 litres of rectified spirit in about one ton. I have already told you the rate of ethanol made from these materials in the article.

Unique Business Idea- Sugarcane Juice Powder Business Idea


If we see the process of ethanol production in brief, first of all, molasses is stored in a fermentation tank, then water and yeast are added to it, and it is left for 24 hours.

After which, the fermentation process is complete. After that, to remove sewage from this raw material, sludge is separated by putting it in a sludge remover, and the clear material is sent for distillation.

In the process of distillation, this fermented wash is heated under pressure, due to which its alcohol reversely moves upward and its waste material comes down.

After this, this alcohol is condensed and collected. Now the concentration of COB and BOD in the waste water collected at the bottom is very high. That’s why it cannot be discharged directly. You must first treat it in your plant, which will necessitate the establishment of a separate treatment plant.

Friends, your initial investment will be in this, but you will also receive three by-products, which are bio-CNG, bio-fuel, and fertilizer. And all three of these are high-value products, so after selling them, the cost of your treatment plant will be recovered within two years, and after that, you can earn a good profit from it.

Licenses required to start ethanol production business in India

To begin the process of obtaining a licence to operate this plant, you must first obtain an ethanol manufacturing licence from the State Excise. After that, you will have to take a licence from the CPCB, i.e., the Central Pollution Control Board, for the operation of your plant. Then you have to take an NOC from the district or village body of local bodies in your area, and after that, you have to take water lifting permission to take water from your nearby water sources, and finally, you have to take permission from the State Electricity Board for electricity.

Cost of licenses of ethanol production business

So if we talk about the cost of licencing permission, then you will not get much. For each license, you will be charged a one-time licence fee of around 1000 to 10,000, as well as a recurring annual fee of around 2 to 3 lakhs.

Total investment required to start ethanol business in India

The minimum investment which you require to start ethanol business in India is approx. 1.5 to 2 Crore rupees. This price is the approximated amount calculated by the current price of machines and setup required to start this production plant of 5000 litres of rectified spirit.

How much does it cost to start a ethanol plant?

If you want to start a small scale ethanol business in your village, then you need a minimum investment of 50 lakhs to 75 lakhs rupees.

10 KLPD Ethanol Plant cost- Approx. 1.5 to 2 Crore Rupees.

50 KLPD Ethanol plant cost– Approx. 9 to 10 Crore Rupees.

How many acres of land is used for ethanol?

Now, if we talk about the requirement of land here, if you are building a distillery for 50,000 litres of molasses, then you will have a requirement of about 20 to 25 acres of land. The requirement of this light will also depend on the capacity of your plant and your field staff, and its price will also be according to the rates prevailing in your area.

Where to sell the Ethanol from your production business?

If we talk about where you can sell this ethanol, then there are mainly two types of buyers. First of all, here you will have industrial buyers who will purchase industrial alcohol and use it in many products such as perfume manufacturing, paint manufacturing, the pharmaceutical industry, and these types of industries, and then you can sell your ethanol to these manufacturers.

Who buys ethanol in India?

Second, you can sell your ethanol to oil marketing companies (OMCs) like HPCL, IOCL, and BPCL to be blended into petrol.

Nowadays, the demand for ethanol in the country is even higher, and according to the current production capacity, this demand is not being met. Because of this, the government is also giving many subsidies and implementing schemes to promote this much production.

What are the profit margins for ethanol?

Now, talking about the profit margin here, you will get different types of profit on ethanol produced from different types of raw materials. For example, if you produce ethanol from C-heavy molasses, you will get a profit of about 18 rupees per liter, or if you produce ethanol from B-heavy molasses, you will get a profit of about 21 rupees per liter.

But if we talk in general terms, then you will get a profit of about 15 to 20 rupees per litre on ethanol production. Apart from this, some profit will also be generated from the by-product of your water treatment plant.

Return on Investment after starting ethanol production business in India

So if we talk about the payback period of this business, then here you will get a payback period of about five years because your investment will be returned to you within five years.

In many places, groups of farmers have also started this business together, with each person investing less and getting their raw material nearby or in their own fields, lowering the cost of their raw material and increasing their profit margin significantly. The main factor increasing profit in this business is the price of raw materials, which increases significantly after the season.

Is ethanol business profitable?

Yes, ethanol business is profitable. For example, if you produce ethanol from C-heavy molasses, you will get a profit of about 18 rupees per liter, or if you produce ethanol from B-heavy molasses, you will get a profit of about 21 rupees per liter.


That’s why our suggestion is that you buy raw materials at the right time of year and keep them in a storage facility near you so that you will make a lot of profit on them. So this was the complete information about the ethanol production business. Thank you.

Sanjit Dhabekar

Sanjit Dhabekar is a passionate Digital Marketer and Blogger. He loves to explore new opportunities to rank websites and earn money online.

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