The Indian government introduced the E20 blended fuel programme in 2025. This is a welcome step that demonstrates the government’s efforts to improve air pollution and environmental degradation. However, in recent months, there have been some deliberations on the implementation of the initiative. The Indian government has attempted to proactively counter some of the concerns that have been raised; however, some points need further deliberations going forward.
This article highlights the ongoing discussions regarding this policy, covering the viewpoints of all stakeholders – policymakers, automobile manufacturers and consumers.
Government’s view and policy progress
The Indian government has strongly advocated for ethanol blending in fuel as a crucial component of its energy and climate strategy. The aim is to reduce the country’s overwhelming reliance on crude oil imports, enhance energy security and support domestic agriculture by providing farmers and distilleries with new markets for their produce and by-products.
The centre’s stance is reflected in the National Policy on Biofuels (2018, amended 2022), which set an ambitious target of 20 per cent ethanol blending in petrol, achieved five years ahead of the initial 2030 goal. The government asserts that ethanol blending strengthens energy security by replacing imported fossil fuels with domestically produced biofuels, supports rural prosperity by offering farmers reliable markets for crops such as sugarcane and grains, reduces urban air pollution and carbon dioxide emissions of about 73.6 million tonnes and advances climate action, while also promoting vehicle technology upgrades and robust fuel infrastructure.
India achieved a historic milestone in 2025 by reaching 20 per cent ethanol blending in petrol. This reflects a significant transformation from just 1.53 per cent blending in 2014 to nearly 20 per cent by mid-2025, marking a multifold increase within a decade. The journey saw incremental progress, moving from 8.17 per cent in 2020-21, 12.06 per cent in 2022-23, 14.6 per cent in 2023-24, and finally to the current 19.9-20 per cent mark by July 2025.
To achieve this, the government expanded the supply chain by increasing ethanol production capacity from 380 million litres in 2014 to over 6,610 million litres by June 2025. Supportive policies like administered prices for ethanol procurement, reduction of GST to 5 per cent, subsidies for new distillery set-ups, long-term supply contracts and infrastructure investments ensured reliable sourcing and distribution. The inclusion of sugarcane and surplus grains as feedstocks and various interest subvention schemes for distilleries provided flexibility and strengthened rural income. Programmes like the Pradhan Mantri Ji-Van Yojana further enabled production from advanced biofuels and agricultural residues.
The government is planning further expansion beyond E20. According to official statements and recent policy shifts, efforts are under way to boost ethanol production, streamline interstate movement and develop vehicle infrastructure compatible with higher blends. Pilot programmes for ethanol blending in diesel and support for flex-fuel vehicles (FFVs) are already being discussed. The union cabinet has approved price hikes for ethanol from molasses, incentivising further production and signalling the government’s intent to push beyond the current 20 per cent blend.
Trends in petrol prices over the years
Ethanol blending has resulted in substantial cost savings for the Indian government, primarily by reducing the country’s dependence on expensive crude oil imports. Over the past decade, ethanol blending has saved India more than Rs 1.44 trillion in foreign exchange expenditure, substituting approximately 24.5 million metric tonnes of crude oil. In the current year alone (2025), with 20 per cent ethanol blending, the expected annual forex savings are around Rs 430 billion. Additionally, this programme has redirected funds previously spent on oil imports towards farmers, with payments in 2025 alone reaching Rs 400 billion, thus boosting rural incomes and supporting domestic agriculture.
Technically, studies and expert analyses like those by the Centre for Social and Economic Progress suggest that with 15-20 per cent ethanol blending, the potential reduction in petrol prices could be between Rs 3 and Rs 8 per litre, provided there are no major added costs for oil marketing companies (OMCs). There have been concerns among consumers that the effect on retail petrol prices has not been directly proportional or immediately visible.
However, the government has noted that as of July 31, 2025, the average cost of purchasing ethanol for the ethanol supply year (ESY) 2024-25 is Rs 71.32 per litre, which includes GST and transportation. OMCs mix 20 per cent of this purchased ethanol with motor spirit to create E20. The cost of ethanol made from C-heavy molasses also went up from Rs 46.66 per litre (ESY 2021-22) to Rs 57.97 per litre (ESY 2024-25). During the same time period, the price of maize-based ethanol saw a rise from Rs 52.92 per litre to Rs 71.86 per litre. Therefore, ethanol blending has not resulted in the price drop of petrol as previously envisaged.
Points of discussion
With more ethanol blending, the government highlights benefits like better acceleration and lower carbon emissions, about 30 per cent less than E10 fuel, as ethanol’s higher octane rating allows for improved engine performance, especially in modern vehicles tuned for this blend.
However, the adoption has raised concerns among vehicle owners, particularly for older cars that are not designed or tuned for such high ethanol content. Various automobile forums and surveys like the one conducted by LocalCircles, involving over 37,000 participants, have reported complaints around reduced fuel mileage and estimated drops of 6-7 per cent on E20 compared to pure petrol. Along with mileage, there have also been concerns about increased wear and tear or corrosion due to ethanol’s hygroscopic nature, which can affect engine components like fuel lines and rubber or plastic parts. According to the above survey, around 28 per cent of the participants experienced unusual wear and tear due to having older vehicles as well.
The government has, however, countered many of these points and has stated that mileage is affected not only by the fuel but also by other factors such as driving habits, maintenance and oil change frequency.
While the Ministry of Petroleum and Natural Gas and research bodies like the Automotive Research Association of India have stated that scientific studies do not show significant damage or abnormal wear in legacy vehicles using E20, consumer apprehension remains, particularly regarding maintenance costs. In fact, NITI Aayog, in its 2020 report, had also recommended tax incentives to offset any loss in fuel efficiency and to promote E20-compatible vehicles.
Mahindra & Mahindra confirmed that all its vehicles produced after April 1, 2025 are specially calibrated for E20 fuel to ensure acceleration and fuel efficiency. They acknowledged that the shift to E20 may cause minor changes in acceleration and fuel efficiency in their vehicles, depending on driving behaviour. They also assured customers that they will honour all warranty commitments to their customers on account of using E20.
Further, there has been a demand for clearer communication on fuel blends at petrol pumps. Many users are unaware of whether their vehicles are E20 compatible. Since E20 has been rolled out largely as a mandatory blend in petrol pumps, there is often no option to purchase lower ethanol blends like E10 or pure petrol. This lack of variety is a point of ongoing debate. Thus, going forward, consumer awareness will help build broader public confidence and acceptance of E20 fuel in India.
Comparison with Brazil’s model
During speeches at events like the Pioneer Biofuels 360 Summit and in media interactions, the union petroleum and natural gas minister Hardeep Singh Puri has compared India’s E20 ethanol blending initiative with Brazil’s model on multiple occasions. He mentioned that Brazil has been operating with E27 ethanol-blended fuel for years without any operational issues. However, India’s handling of ethanol fuel blending somewhat differs from the Brazilian model.
Brazil has a long-established ethanol blending programme dating back to the 1970s and has pioneered the widespread adoption of FFVs since 2003. These FFVs can run on any mix of ethanol and petrol, including pure hydrous ethanol (E100), giving consumers the freedom to choose the fuel based on price and availability. By 2023, over 72 per cent of new passenger vehicles in Brazil were flex-fuel compatible, and consumers have clear fuel choices at pumps, including options like E25 and E100. This market-driven approach with visible price incentives created strong consumer trust and acceptance.
India’s approach has been more accelerated, even without a similar FFV automobile market, with a rapid push to hit 20 per cent ethanol blending by 2025, from a mere 1.53 per cent in 2014.
Going forward, India’s ethanol blending initiative can adopt measures from Brazil’s decades-long, market-sensitive and consumer-friendly approach that paired fuel choices with vehicle compatibility and phased policy roll-outs. Addressing these gaps can help India enhance the acceptance and effectiveness of higher ethanol blends, ensure consumer concerns are addressed, meet environmental goals and support farmers.
Parting thoughts
Moving forward, the current implementation raises a few points to consider. One, given that people on the ground feel there is a lack of clear communication, should there be campaigns to increase awareness and provide greater clarity to the topic? Two, will the experience of transitioning to E20 help facilitate future moves to higher blends for both consumers and the government?
Net, net, despite ongoing deliberations, ethanol blending is seen by the automobile sector as an important step to reduce dependence on imported fossil fuels and lower vehicular emissions. The government and industry experts are working towards technological improvements in engines and fuel systems to make higher ethanol blends sustainable and compatible with a growing vehicle fleet, aiming to maintain performance while delivering environmental and economic benefits.
By Himanshu Tagore
