To Blend or Not to Blend? Evaluating India’s Ethanol Policy and its Trade-Offs

Introduction

India’s energy market is undergoing a dramatic revolution today. On April 1, 2026, the Government of India mandated the sale of E20 blended petrol throughout the country. Further, it is also proposing a draft amendment to include E85 and E100 blended petrol in the future. What are these fuels? E refers to ethanol (ethyl alcohol), and the number after that represents the percentage of ethanol blended with petrol. Ethanol is a compound that can act as a biofuel. It burns cleaner than most fuels. This Ethanol Blended Petrol (EBP) Programme, first introduced during PM Vajpayee’s tenure in 2003, is one part of the government’s Atmanirbhar Bharat mission. It aims to reduce New Delhi's reliance on foreign crude oil, while simultaneously promising a new greener fuel sourced from its vast agricultural sector. However, this aggressive pursuit of ethanol blending has also generated considerable debate around water and food security, along with fuel efficiency. 

Alcoholic Alternative

Why is the Indian government pushing so hard for ethanol blended fuels? The primary reason is energy sovereignty. This is a critical vulnerability for India, as New Delhi has always relied on foreign countries to meet its rising energy needs, and that dependency is steadily rising. In fact, government data from February 2026 showed that India imported nearly 91% of its crude oil requirement from abroad, a historical high. Furthermore, most of that volume, approximately 54%, came from West Asian nations alone. If half of our energy needs are supplied from a region mired by frequent conflicts and instability, it can become a major hazard. Any potential disruption there could wreak havoc on the Indian economy, as sectors like transport, manufacturing, etc. would be adversely impacted. This is being demonstrated during the ongoing Iran War, which has led to the closure of the Strait of Hormuz and affected India's energy supplies.

But if energy security is the primary concern, why not opt for other renewable alternatives such as electrical vehicles or green hydrogen fuel? To transition to electric vehicles in the short run is tough, even though it is the ultimate long run objective. India would need millions of fast-charging stations, whose set-up would require a ton of investment while also posing logistical challenges in places like the Himalayas. Moreover, most EV battery components like lithium, cobalt or rare earth minerals are sourced from China, and Chinese companies like BYD have already captured one third of the Indian EV market. Going all in on EVs would simply transfer our dependency from West Asia to China, a major geopolitical rival. 

Green hydrogen, on the other hand, even if ideal for heavy vehicles like trucks, currently costs about $5 per barrel, which is too high of a cost. It is also impractical for personal vehicles as it requires specialized, expensive tanks to store. Both battery powered and hydrogen based vehicles would require capital-intensive production that would only benefit tech conglomerates and wealthy consumers, with little to no dividends for the vast majority of the population. On the other hand, ethanol is labour-intensive. The primary sources of ethanol are crops like sugarcane and maize, which can be obtained from a huge number of farmers. This crop is then transported in bulk to be distilled, which creates Dried Distillers Grains with Solubles (DDGS), a high protein animal feed, as a by-product. This can again be sold to dairy and poultry farmers, creating a circular economy based in India.

Hence, in the short-run, ethanol acts as a bridge. It allows New Delhi to reduce its oil and import dependence today by utilising our existing transport infrastructure, while EV and hydrogen technology matures and gets a solid indigenous industrial base, after which they can be adopted.

Environment and Efficiency

The Ethanol Blended Petrol (EBP) Programme has already proven to be effective, with New Delhi having saved over Rs. 1.4 trillion in foreign exchange since 2014-15 due to petrol substitution. Further plans to increase the ethanol content are already in full swing, with the ultimate aim of decoupling India’s transport sector from the global oil market. This can also create a decentralized energy system in India, sourced from the agricultural sector, benefiting rural India. Ethanol is also environmentally-friendly. It reduces greenhouse gas emissions by 50-65% compared to traditional petrol. 

The ethanol push also has ramifications for the state of West Bengal. Bengal is one of the largest rice producers of India, but the surplus grains and low quality rice that is left over fails to fetch a good price. These can be utilised in the production of ethanol, reducing wastage while also earning money for farmers. Distillers would have to be set up in the state to convert crops into ethanol. This can also act as a new source of employment, potentially helping reverse the state’s economic decline. The state is known for the deindustrialisation it underwent during the Left government’s long tenure. The ethanol distilleries would therefore bring in much needed investment to the state.

There are several concerns, however, that have arisen regarding the use of ethanol. Perhaps the greatest bone of contention is food security. The Economic Survey of 25-26 has already highlighted this. The aggressive push for ethanol is reshaping Indian agriculture, with farmers giving preference to maize and sugarcane instead of pulses and oilseeds, as they can be used to produce ethanol. This can cause food inflation and impact supplies during bad harvests. It can also place stress on water reserves. Sugarcane is a highly water-intensive crop, and it is estimated that producing one litre of ethanol from sugarcane requires 2,800 to 3,000 litres of water. Moreover, the places where sugarcane is produced, states like Maharashtra and Uttar Pradesh, already face frequent water shortages and droughts. Adding the burden of ethanol can exacerbate this crisis.

One solution for this could be 2G ethanol. 1G ethanol is produced from crops like sugarcane and maize while 2G ethanol is produced from agricultural waste like straw, husk and stalks. This can allay concerns over food security as it doesn't compete with the food supply and only uses waste that would have otherwise been burnt. Hence 2G ethanol is more sustainable and greener. It is also cheaper, and combined with the government having reduced the GST on ethanol to 5% from 18%, can significantly reduce fuel costs. 

Furthermore, because older automobiles (before April 2023) are not tuned for E20 fuel, using E20 may result in a decrease in their fuel efficiency, with estimates suggesting a decline of approximately 3-7%. It can also cause corrosion to rubber and plastic parts and damage the engine of the vehicle. It will also reduce mileage, as ethanol has a lower calorific value than petrol, which means more ethanol fuel has to be burned than petrol to travel the same distance. This means that consumers will have to buy more fuel, hence increasing costs. The NITI Aayog in its 2021 roadmap suggested tax breaks on the ethanol fuel to compensate customers for the drop in fuel efficiency, though this has not materialised yet. Hence, many consumers have fiercely opposed this new policy, as their vehicle mileages have dropped but petrol prices have gone up.

Conclusion: To Blend or Not to Blend?

To be sure, India is not the first nation to have adopted ethanol based fuels on a wide scale. Brazil, the US and the EU have all taken similar steps to a varying degree in the past. In India, there are legitimate benefits and concerns. While its promises are plenty, the program’s success will hinge on mitigating the profound risks it poses to food and water security, as well as vehicle performance. If these issues are effectively addressed, then the new policy may truly revolutionise India’s energy market by reducing strategic vulnerabilities, bringing forth a greener fuel alternative and benefitting the nation’s farmers.