Fuelling Autonomy: Biofuels and India’s Quest for Energy and Diplomatic Sovereignty

In recent weeks, ethanol has sparked debate in India. Vehicle owners complained about lower mileage after the rollout of E20 petrol, while Washington pressed New Delhi to scrap import curbs on ethanol and other farm goods. When India refused to lift import curbs and continued buying discounted Russian oil, the US retaliated by doubling tariffs on Indian exports to 50%, hurting sectors such as textiles. Taken together, these disputes underscore how energy dependence is narrowing India’s room for manoeuvre in trade negotiations and foreign policy.

Energy Dependence as Strategic Vulnerability

India imports 85% of its crude oil, a dependency turning into strategic vulnerability as global energy markets fragment. With energy demand projected to double by 2040, the country has limited options but to purchase cheap Russian crude while navigating punitive tariffs. With few domestic energy resources, India is often compelled to align its policies with Western priorities.

A decade ago, forums like the WTO offered developing countries some buffer against such coercion. That multilateral order has frayed as states continue to regain power from the multilateral order. Trade and energy diplomacy have become increasingly weaponized, with tariffs, secondary sanctions, and monopolised payment networks like SWIFT turning energy flows into instruments of political pressure. For India, energy security is no longer about cheap oil alone. It is about the right to pursue independent foreign and trade policies without fearing the next tariff hike or sanctions threat.

Why Biofuels Matter: A Hedge Against Geopolitics

India’s experiment with ethanol began in 2003, amid the Iraq War and oil price spikes. The Ethanol Blending Programme (EBP) was launched with modest goals: hedge against oil shocks, cut emissions, and offer farmers new markets. Two decades on, the stakes have risen dramatically. With oil dependency colliding with tariff wars and sanctions, biofuels now offer India not just cleaner energy but also strategic insulation from volatile oil markets and currency shocks.

The numbers tell the story. Every 1% ethanol blending displaces 700 million litres of petrol imports, saving ₹1–1.5 lakh crore annually. Between 2014 and 2024, ethanol blending cut 69.8 million tonnes of CO₂ emissions and saved $15.5 billion in foreign exchange. India has already tripled ethanol production in five years, becoming the world’s third-largest producer. The National Policy on Biofuels (2018) and its 2022 update advanced the 20% blending target from 2030 to 2025–26, accelerating investments in second-generation ethanol made from crop residues rather than food grains alone.

Unlike crude oil, ethanol is domestically produced from sugarcane, surplus rice, maize, and increasingly, agricultural waste, tying India’s energy security to its farms rather than foreign oilfields.

India’s Stake in the Global Biofuel Order

If India wants biofuels to deliver strategic leverage, it must shape the rules of global biofuel trade, not merely follow them. Despite India being the world’s third-largest ethanol producer, it is the United States, Brazil, the European Union, and China that dominate the global biofuels market, setting most of the standards on technology, carbon accounting, and trade flows.

Brazil leads with a 27% ethanol blending mandate, 90% flex-fuel vehicle penetration, and its RenovaBio program linking carbon credits to emissions intensity. The US, producing 40% of the world’s ethanol, operates under the Renewable Fuel Standard and targets 11 billion litres of sustainable aviation fuels annually by 2030. The EU, meanwhile, restricts first-generation biofuel imports over sustainability concerns, while China has invested heavily in cellulosic ethanol to cut oil imports and urban pollution simultaneously. Together, these economies displaced two million barrels of oil demand per day in 2022, reshaping global energy systems.

For India, the risk is clear: without a stronger voice in biofuels ecosystem, future rules could marginalize its producers or restrict market access. The Global Biofuels Alliance (GBA), launched by India at the 2023 G20 Summit with 22 member countries, offers a platform to harmonize carbon standards, pool technology investments, and build regional biofuel corridors across Asia, Africa, and Latin America. With the IEA projecting global biofuel demand to rise 23% by 2028 and advanced biofuels requiring an eleven-fold scale-up by 2030, India’s leadership could ensure that emerging economies shape the rules of the low-carbon transition rather than inherit them.

Redrawing Energy Diplomacy

Biofuels could also rewire India’s external relationships. In West Asia, Gulf investors such as the UAE’s Mubadala and Saudi Aramco, already funding Indian green hydrogen projects, are exploring clean energy investments to hedge against a post-oil future. These partnerships give India capital and technology while offering petrostates new relevance in decarbonizing economies.

At the same time, energy realignments are unfolding to India’s north. Recently, India and Russia announced to work jointly on the Northern Sea Route and the North-South Transport Corridor, cutting transport costs to Europe by up to 40% and bypassing maritime chokepoints. China, facing similar tariff pressures, is financing Central Asian pipelines and Arctic shipping routes, opening possibilities for a Russia-India-China (RIC) energy network spanning oil, gas, biofuels, and green hydrogen. Such corridors could give Asia greater bargaining power while reducing exposure to sanctions or payment restrictions.

India’s energy diplomacy already extends beyond RIC. Partnerships with Brazil on bioenergy research, Argentina on feedstock trade, and African nations on ethanol corridors signal a broader South–South strategy. Through the GBA, India is pushing for joint R&D funds, common sustainability standards, and cross-border blending protocols, so emerging economies shape the terms of the energy transition rather than remain rule-takers.

The Policy Blueprint for Energy Sovereignty

For biofuels to shift power asymmetries, India must act on three fronts.

First, domestic scaling. Ethanol acceptance at home requires transparent pricing, nationwide flex-fuel vehicle standards, and large-scale investment in pipelines and storage. Second-generation ethanol from crop residues must become the norm to avoid food-versus-fuel conflicts. A dedicated Energy Transition Fund pooling green bonds, carbon credit revenues, and multilateral financing should back ethanol plants, vehicle retrofits, and R&D just as earlier subsidies made solar power competitive.

Second, global standard-setting. India should use the GBA to draft harmonized carbon-intensity metrics, certification systems, and blending standards. South–South technology funds could help Asia, Africa, and Latin America leapfrog to advanced biofuels without replicating the West’s land- and water-intensive models.

Third, integrated energy diplomacy. Energy corridors with Russia, China, and Gulf partners must align with biofuel trade routes so India’s clean energy ambitions reinforce rather than replace its strategic partnerships. Coordinated investments in green shipping, bio-refineries, and cross-border power grids could anchor India’s role as a clean-energy hub across the Global South.

Conclusion: Beyond Energy Security

India’s biofuel revolution is no longer about cleaner air or rural incomes alone. It is about whether the world’s fourth-largest economy can exercise strategic autonomy in an era of tariff wars, sanctions, and fractured multilateralism. Every additional tonne of ethanol displaces imported oil, cuts carbon emissions, and expands India’s diplomatic room for manoeuvre.

The blending milestones achieved so far are impressive. But the larger test lies ahead: Can India scale advanced biofuels fast enough to cut its oil import bill by a third? Can it write the rules of global biofuel trade rather than inherit them? And can it leverage clean energy to pursue foreign and trade policies anchored in sovereignty rather than vulnerability?

The next oil shock or tariff war should find India not scrambling for waivers but exporting green fuels, shaping global standards, and steering the energy diplomacy of the future.