'India’s biodiesel sector in crisis': Price cuts drive biodiesel producers to Supreme Court

By Jag Jivan

The Biodiesel Association of India (BDAI) has warned that the country’s biodiesel sector is facing a severe crisis due to the breaking of government assurances under the 2018 National Biofuel Policy, non-purchase of biodiesel by Oil Marketing Companies (OMCs), and sudden price cuts.

India’s biodiesel programme was launched on 4 June 2018 with the Ministry of Petroleum & Natural Gas announcing the National Biofuel Policy, assuring entrepreneurs that all biodiesel produced would be purchased. On 30 September 2022, mandatory blending targets were also set. Relying on these commitments, over 150 biodiesel plants were established across India by MSME investors. A pricing mechanism managed by KPMG and approved by the ministry guided tenders and payments, under which OMCs procured biodiesel until September 2024.

The situation changed between October 2024 and September 2025, when a new tender was issued at ₹91–₹101 per litre despite rising raw material costs and higher taxes. Although OMCs issued Letters of Intent and manufacturers procured raw materials, the promised off-take did not begin. Appeals to the ministry and senior authorities went unanswered, pushing many MSME firms into non-performing asset (NPA) status. Banks initiated recovery proceedings, salaries went unpaid, and plants began shutting down.

On 13 March 2025, matters worsened when OMCs reportedly scrapped the KPMG-managed pricing formula and canceled the tender, reissuing it at ₹80 per litre—causing a loss of more than ₹21 per litre for producers. Many smaller firms were forced to sell at losses to service bank loans.

While ethanol blending orders issued alongside biodiesel were strictly enforced and expanded, biodiesel orders were repeatedly deferred. According to BDAI, biodiesel provides 10% higher mileage in diesel engines, reduces wear and tear, and cuts pollution. Despite these benefits, producers are denied permission for domestic retail or exports, leaving them reliant on OMCs as their sole buyers.

Faced with mounting losses, BDAI filed a writ petition in the Supreme Court. On 16 September 2025, a bench of Chief Justice B. R. Gavai and Justice K. Vinod Chandran issued notices to the government and other parties, directing responses within three weeks.

Dharamvirsingh Gangasingh Rajpurohit, Vice President of BDAI, said, “Yes, BDAI has requested permission for exports. However, there has been no response from the government so far. A letter was sent through RPAD, and we also held personal meetings with ministry officials seeking permission to export. The Supreme Court has now taken cognisance of the matter and directed the government to submit its response within three weeks. This is a crucial step forward for us.”

He added, “Our immediate demands from the Government and OMCs are clear: (1) Imposition of penalties on OMCs on an immediate basis, (2) A formal response from the government within three weeks, and (3) Issuance of a new tender based on the KPMG formula. Without these urgent steps, the biodiesel MSME sector cannot survive.”

Rajpurohit stressed that “thousands of families, crores of rupees, and India’s clean-fuel goals are at risk,” urging the government to uphold its policy promises.

BDAI has appealed to the Prime Minister to enforce mandatory biodiesel blending, direct OMCs to honour tender commitments, ensure fair pricing under the KPMG-managed mechanism, or allow exports to safeguard the MSME sector.

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