State-owned oil majors like Indian Oil, HPCL, and BPCL are building large-scale collection networks for used cooking oil. To meet the government’s 1% Sustainable Aviation Fuel mandate for international flights starting in January, companies must overcome supply chain fragmentation. While the initiative aims to reduce the national oil import bill, success depends heavily on establishing a reliable and traceable logistics system in a historically unorganized market.
Indian state-backed oil marketing companies, including Indian Oil Corporation, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation, are rapidly expanding their efforts to source used cooking oil to produce Sustainable Aviation Fuel. This transition is driven by the government’s green energy policy, which requires international flights departing from India to blend 1% of this sustainable fuel starting in January. By tapping into domestic waste, these companies aim to lower India’s substantial crude oil import costs, which remain a major pressure point for the national economy.
The Logistics and Execution Challenge
The central challenge for these oil majors lies in the supply chain. While India produces an estimated 3 million tons of waste cooking oil annually, current recovery systems are fragmented. A significant portion of this waste is currently diverted back into the food chain through illicit channels, making it difficult for formal refineries to secure consistent feedstock. To bridge this gap, state refiners are shifting from traditional procurement to developing a more formal, traceable network. This includes collaborating with specialized aggregators to implement digital tracking systems, which are essential to meet the strict quality standards required for aviation-grade fuel.
Investor Monitorables: Capex and Supply Reliability
For investors, the move into bio-based fuels represents a strategic shift in the business model of these oil companies, aimed at diversifying revenue and meeting decarbonization goals. However, this transition comes with inherent execution risks. Setting up the necessary infrastructure to collect waste from thousands of restaurants and food processors is capital-intensive. Furthermore, the cost of acquiring this feedstock can be volatile. The financial impact will depend on the ability of these companies to secure regular supplies at competitive prices without significantly increasing their operating costs.
Looking ahead, market participants will monitor whether these companies can successfully scale their collection infrastructure to meet the 1% blending target without relying on expensive imports. The speed at which they can formalize the supply chain and manage potential cost pressures on profit margins will be a key factor to watch in upcoming quarterly results and management guidance. As India works toward building a biofuel-ready ecosystem, the ability to turn industrial waste into a reliable energy source will be the ultimate test for these state-run refiners.