Why ethanol-blended petrol is here to stay

INDIA has reached its target of 20 per cent ethanol-blended petrol (E20) five years ahead of schedule, marking a major step in the country’s green fuel journey. While the government hails this as a milestone in reducing emissions, saving foreign exchange and boosting farmers’ incomes, the shift has also sparked a debate on fuel efficiency, vehicle health and consumer costs.

Prime Minister Narendra Modi launched the higher E20 blend in 2023, based on research that ethanol can be safely used in petrol blends with levels ranging from 5 per cent to 100 per cent. Ethanol blending first started in the 1970s as a response to oil price shocks, with countries like the United States and Brazil becoming pioneers. In India, the key drivers for it have been import substitution, energy security and the promise of lower prices.

The Ministry of Petroleum and Natural Gas calls biofuels and natural gas “bridge fuels”, a viable, non-disruptive step towards meeting India’s net zero emissions target by 2070. A NITI Aayog study shows that greenhouse gas emissions from sugarcane-based ethanol are 65 per cent lower than petrol, while maize-based ethanol cuts emissions by 50 per cent.

The government claims that since 2014-15, ethanol blending by public sector oil marketing companies has saved India more than Rs 1.44 lakh crore in foreign exchange, substituted around 245 lakh metric tonnes of crude oil, and reduced CO2 emissions by 736 lakh metric tonnes, the equivalent of planting 30 crore trees. This year alone, payments to farmers are expected to touch Rs 40,000 crore, with foreign exchange savings of about Rs 43,000 crore.

It says blending not only curbs pollution, but has “eliminated sugarcane arrears” and improved the viability of maize farming, besides tackling agriculture distress issues such as suicides in areas like Vidarbha.

Concerns that E20 reduces mileage and damages engines are not new. In 2020, an Inter-Ministerial Committee of NITI Aayog examined the issue, supported by research from the Indian Oil Corporation, Automotive Research Association of India, and the Society of Indian Automobile Manufacturers (SIAM). Still, gaining consumer confidence is an area that needs attention.

An auto industry expert, requesting anonymity, says that ethanol is a highly corrosive and dehydrating fuel that can cause damage to components of the fuel delivery system in engines. “Neither the government nor petrol stations are properly informing motorists about these risks. Consumers are being kept in the dark,” he adds.

According to the ministry, E20 offers better acceleration, smoother ride quality, and up to 30 per cent lower carbon emissions compared to E10. Ethanol’s higher octane number (around 108.5 versus petrol’s 84.4) helps modern high-compression engines perform better, it claims. The higher heat of vaporisation cools intake air, increasing fuel density and volumetric efficiency.

India’s regular petrol now has a Research Octane Number (RON) of 91, up from 88, and RON 95 with E20, reducing knocking and improving performance. The ministry argues that claims of “drastic” mileage drops are misplaced, as mileage depends on driving habits, maintenance, tyre condition and air-conditioning load.

For many carmakers, models sold since as early as 2009 are already E20-compatible, meaning efficiency losses should be negligible. Where older models face rubber or gasket wear, the replacement is inexpensive, needed just once in a vehicle’s lifetime.

A persistent criticism is that ethanol-blended petrol should be cheaper than unblended fuel. In 2020-21, when NITI Aayog prepared its report, ethanol was indeed cheaper than petrol. But procurement prices have since risen sharply.

As of July 31, 2025, the average procurement cost of ethanol for the current Ethanol Supply Year is Rs 71.32 per litre, including transport and GST. C-heavy molasses-based ethanol has risen from Rs 46.66 in 2021-22 to Rs 57.97 in 2024-25. Maize-based ethanol has gone up from Rs 52.92 to Rs 71.86 over the same period. This means ethanol is now costlier than the pre-tax price of refined petrol. However, the ministry stresses that oil companies have not abandoned the E20 mandate because the programme still delivers on energy security, farmer incomes, and environmental goals.

The final retail price of petrol is driven largely by Central and state taxes, not just fuel production costs. Another automobile specialist stresses that the government should ask fuel outlets to provide different ethanol blends separately and introduce clear colour-coding for them. “Most buyers have no idea about the exact ethanol content in the petrol they are filling. In fact, when tested, vehicle mileage dropped by nearly 5 per cent on average,” he observes.

Social media speculation that insurers will not cover the damage caused by E20 use has been dismissed by the ministry as “baseless fear-mongering”.

It insists that safety standards for E20 are well-established under the Bureau of Indian Standards and Automotive Industry Standards. In most performance parameters, drivability, startability, metal and plastic compatibility, there are no issues.

As per the ministry, Brazil has been running on E27 for years without problems, with global automakers like Toyota, Honda and Hyundai selling vehicles there too. The same companies are part of India’s ongoing consultations on whether to move beyond E20 after October 31, 2026.

The ministry says any such move will require “careful calibration” involving stakeholders from feedstock suppliers to vehicle manufacturers. For now, the roadmap commits to E20 until that date.

One major difference between India and Brazil is the consumer choice. In Brazil, flexible-fuel (or flex-fuel) cars have been common for decades, letting drivers choose their ethanol blend level based on price. In India, flex-fuel cars are still rare, and consumers currently have no choice in blend levels.

The government has been urging automakers to introduce more flex-fuel models, but the uptake remains slow. Until then, Indian motorists will have to adapt to higher ethanol blends as standard, without the flexibility enjoyed elsewhere.

The ministry insists that the ethanol programme is here to stay. It says rolling back to pure petrol would undo years of gains in pollution control, farmer incomes, and energy transition. Still, it acknowledges that beyond E20, further blending must be gradual, transparent, and backed by robust industry preparedness.

What it costs

— Average ethanol procurement cost

(July 2025): Rs 71.32/litre.

— C-heavy molasses ethanol: Rs 46.66 (2021-22) to Rs 57.97 (2024-25).

— Maize ethanol: Rs 52.92 to Rs 71.86.

Govt on savings

— Target met 5 years ahead of schedule.

— Forex saved (2014-15 to July 2025): Up to Rs 1.44 lakh crore.

— CO2 cut by 736 lakh metric tonnes = 30 crore trees planted.

— Crude oil saved: 245 lakh metric tonnes.

— Farmer payout in ’25: Rs 40,000 cr (likely)

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