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Summary
Indian ethanol makers have lobbied for higher blending mandates and flex-fuel incentives to utilize a 9-billion-litre surplus. But experts and consumers remain wary due to concerns over engine performance, infrastructure readiness, and lower mileage.
New Delhi: Amid the West Asia war, ethanol makers have urged the petroleum ministry to accelerate higher fuel blending and utilize a massive surplus to safeguard national energy security, with India being one of the largest importers of crude oil, according to a letter seen by Mint.
The All India Distillers Association (Aida) wrote to the petroleum and natural gas ministry on 3 March, days after the conflict broke out on 28 February, seeking incentives for flex-fuel vehicles (FFVs), which run on very high ethanol blending, and higher procurement of ethanol by oil marketing companies (OMCs).
Aida represents about 80% of India's total distillation capacity.
The industry’s representation came after underutilisation of ethanol feedstocks in 2024-25 and 2025-26, according to a copy of the letter seen by Mint.
Key Takeaways
- Distillers seek higher blending to counter West Asia’s energy security risks.
- Industry faces a 9-billion-litre surplus as demand lags behind production capacity.
- Distilleries operate at only 25-30% capacity, causing severe financial stress in the sector.
- Consumers report lower mileage, while the government claims E20 improves ride quality.
- High ethanol adoption could save billions in foreign exchange and import costs.
Global oil volatility and supply chain disruptions make it imperative for India to strengthen domestic alternatives and accelerate indigenous biofuel production, the letter stated.
“At a time when the country needs stronger domestic energy buffers against global oil shocks, idle biofuel capacity represents a missed strategic opportunity,” the letter said.
Email queries sent to the ministry of petroleum and natural gas, ministry of road transport and highways (MoRTH), Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd, and Hindustan Petroleum Corp. Ltd remained unanswered.
Ethanol makers have produced about 20 billion litres, while demand has been about 11 billion litres under the government's 20% ethanol blending mandate (E20), the letter said.
The government in FY26 ratified the E20 blending programme, ensuring all petrol sold in the country has a 20% ethanol blend.
This resulted in widespread consumer backlash, with vehicles reportedly recording lower mileage due to the blending.
Flex-fuel vehicles run on more than one type of fuel, usually a blend of petrol and ethanol. These vehicles have lower carbon emissions than those running on just petrol.
Can ethanol blend be increased?
However, mobility experts said a higher blending of ethanol could require more preparedness. While higher ethanol blending has reduced import bills, it also brought out concerns related to vehicle efficiency and engine performance, said Sharif Qamar, associate director of transport and urban mobility at The Energy and Resources Institute (Teri).
“Higher blending would accentuate the impact and enhance public concerns unless all on-road vehicles are made compatible with the higher blended fuel,” he said.
Dispensing infrastructure requires retrofitting and careful planning to prevent delays, he added. Policymakers need to balance fuel choices against costs, supply-chain readiness, food security, and environmental goals.
Another expert agreed with the evaluation. The move towards 20% ethanol blending of petrol was made after extensive tests and studies, S.S.V. Ramakumar, former director, R&D, Indian Oil, said, adding that about 1,000 crore litres of ethanol meets the 20% blending requirement, and the industry estimates 2,000 crore litres production in 2028. So, progressing beyond 20% blending would require extensive tests and study to establish performance and component compatibility.
Aida, however, said distribution systems and vehicle safety may not be a challenge in this case. “With supply already exceeding current requirements and distribution systems largely in place, the transition beyond E20 is structurally feasible,” Aida president Vijendra Singh said. Singh added that higher ethanol blends are safe for modern and flex-fuel engines, citing their successful global use without adverse effects.
To be sure, last year the ethanol-blending programmes were at the centre of debate across political and consumer platforms amid concerns that ethanol-blended fuel could affect vehicle fuel efficiency and engine performance.
In a bid to allay concerns, the government issued statements saying that E20 petrol actually delivers better acceleration and improved ride quality.
In a statement on 12 August, the union ministry of petroleum and natural gas said that vehicle owners do not find any issue related to drivability, metal compatibility and plastic compatibility while using E20 petrol. The ministry also rejected suggestions that E20 causes a ‘drastic’ reduction in fuel efficiency as ‘misplaced’.
Stress for ethanol makers
Aida, in its letter, also said that distilleries across the country are operating at 25-30% capacity due to slower-than-anticipated ethanol offtake by OMCs. “This situation has created considerable financial stress across the sector," it said.
India's ethanol programme was launched to reduce the country's dependence on crude oil imports. Given that India imports nearly 90% of its oil requirements, even a $1-per-barrel increase for a year would add around ₹16,000 crore to the country's import bill, thereby posing a significant risk to the fiscal road map.
In January, petroleum minister Hardeep Singh Puri said that while reaching nearly 20% ethanol blending in the ethanol supply year 2025, India achieved foreign exchange savings of around $19.3 billion and direct payments exceeding $15 billion to farmers over the last decade. The ethanol supply year runs from 1 November to 31 October.
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