Removing policy hurdles necessary for sustainable aviation fuel production in India

India's vast ethanol production capacity could prove to be a strong foundation for the production of Sustainable Aviation Fuel (SAF) in the country, but the uncertainty in current policies is becoming a major hurdle for investors. In an interview with the Hindustan Times, Bharati Balaji, Deputy Director General of the All India Distillers Association (AIDA), stated that if India wants to move forward globally in SAF production, merely setting targets is not enough. She made it clear that long-term policy clarity and purchase guarantees are extremely essential to attract investors.

Bharati Balaji welcomed the SAF blending target set by the government, starting with 1 percent in the year 2027 and reaching up to 5 percent by 2030. However, she warned that Alcohol-to-Jet (ATJ) plants are long-term investment projects of 15 to 20 years. Under such circumstances, investors cannot take a big risk based merely on a 5-year mandate. The industry needs a long-term blending mandate, incentives for early investors, purchase guarantees, and internationally recognized certifications. The blending trajectory beyond 2030 should be officially announced instead of keeping it merely indicative, and domestic flights should also be brought under this mandate.

Talking about the policy framework, she stated that it should be 'feedstock-neutral', with eligibility determined based on lifecycle emissions. Ethanol made from sugarcane juice, molasses, maize, Food Corporation of India (FCI) surplus rice, damaged grain, and agricultural residues should be recognized if it meets carbon-intensity standards. Incentives like GST relief, import duty waivers, income-tax holidays, and green finance suggested in the draft policy are a good beginning, but they also need to be accompanied by interest subvention schemes and capital subsidies for setting up ATJ units.

The main reason for the success of the ethanol blending program was the assurance of procurement at prices determined by Oil Marketing Companies (OMCs). A similar model needs to be adopted for SAF as well, featuring 10 to 15-year offtake contracts and a clear pricing formula. According to Bharati Balaji, policy uncertainty rather than feedstock availability is the biggest challenge. India's annual ethanol production capacity is approximately 2,200 crore liters, out of which 1,300 crore liters is grain-based. Even if 5 percent SAF blending is implemented by 2030, the requirement for ethanol will be only around 160 to 200 crore liters, which is less than a tenth of the country's total capacity.

Fulfilling the access to feedstock is the main problem. Currently, the use of sugarcane juice and B-heavy molasses is restricted, while maize prices have jumped from ₹17-18 per kg to ₹27 per kg within a year. Amidst such changing policies, planning a plant that runs for two decades is difficult. Currently, companies like Praj Industries, Indian Oil, and GPS Renewables are working in this sector, but commercial-scale SAF production will only be possible by 2029-30.

The All India Distillers Association (AIDA) is an organization representing the distillery industry in India, which works to coordinate with the government at the policy level to promote ethanol production and its utilization.