Indian Oil Marketing Companies Launch New Biodiesel Tender for FY 2025-26

India's state-owned Oil Marketing Companies (OMCs) have initiated a fresh tendering process for biodiesel procurement, seeking approximately 200 million liters for the first quarter of the upcoming financial year starting April 2025. 

The latest tender was announced last week by Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL).

The move follows the previous fiscal year's ambitious target of 860 million liters, signaling the government's continued commitment to advancing its biofuel agenda despite persistent challenges in achieving desired blending levels.

Renewed Push Toward Biofuel Goals

The tender underscores India's ongoing efforts to achieve its 5% biodiesel blending target by 2030, as mandated in the National Policy on Biofuels. The procurement drive is particularly significant as it comes ahead of the April 2025 implementation of penalties on the sale of unblended diesel, which is expected to accelerate adoption.

India's biodiesel program has had a complex trajectory since its inception in 2005. While procurement volumes have shown growth—increasing from 1.19 crore liters in 2015-16 to 6.05 crore liters in 2022-23, representing a 408% increase over seven years—the actual blending rate has remained disappointingly below 1%. Current estimates put the blending level at approximately 0.5% to 0.6% for FY 2024-25.

Early challenges stemmed from the limited success of Jatropha cultivation, which faced issues of low yields and long gestation periods. The policy has since evolved to include Used Cooking Oil (UCO), animal tallow, and acid oil as permissible feedstocks, reflecting a more pragmatic approach based on lessons learned.

Biodiesel vs. Ethanol

The stark disparity between India's biodiesel and ethanol programs highlights the unique challenges facing biodiesel adoption. While ethanol blending has surged to over 16% as of December 2024—nearing its target of 20% by 2025-26—biodiesel has languished far behind.

This divergence can be attributed to several factors. India's robust sugarcane production provides a steady feedstock base for ethanol production. In contrast, biodiesel suffers from inconsistent feedstock availability, with the UCO collection network still developing and non-edible oilseed cultivation facing agronomic hurdles.

"Ethanol has benefited from a more focused policy push, regulated supply chains, and effective pricing mechanisms," explained Dr. Rajeev Kumar, an energy policy expert at the Center for Policy Research. "Biodiesel, meanwhile, has struggled with feedstock security and economic viability issues that haven't been addressed with the same urgency."

The biodiesel program has consistently fallen short of its targets. The initial ambitious goal of 20% substitution of diesel consumption with biofuels by 2030 was later revised to a more modest 5% in the 2018 policy update. Even this reduced target seems challenging, with current projections suggesting intermediate goals of reaching 1% by 2026 and 2.5% by 2028.

The gap between aspiration and achievement stems from multiple factors, including limited feedstock availability, inadequate supply chain infrastructure, higher production costs compared to conventional diesel, and insufficient financial incentives for producers.