The next fuel shift: More ethanol in Indians’ gas tank

The ministry of Road Transport and Highways has issued a draft notification proposing the recognition of 85 per cent ethanol-blended petrol (E85) and even 100 per cent ethanol (E100) as automotive fuels. This is as against the 20 per cent blend (E20) that has already been achieved and made mandatory for all petrol sold in India from April 2026. The draft amendments to the Central Motor Vehicles Rules, 1989, once approved, will pave the way for the introduction of flex-fuel vehicles that can run on E85, if not 100 per cent ethanol. While the vehicles manufactured since April 2023 are E20-compliant, compatibility with higher blends will require major overhaul of internal combustion engines and auto parts to withstand any potential corrosion from the hygroscopic (moisture-absorbing) property of ethanol.

The timing of the move is significant, coming amid the unprecedented energy supply shock caused by the conflict in West Asia and closure of the Strait of Hormuz. Oil marketing companies (OMCs) are now realising around Rs 75 for every litre of petrol, net of dealer commission and taxes. At this price, they are reportedly losing roughly Rs 14 per litre. The ex-refinery price of petrol, thus, has to be at least Rs 89 per litre for them to absorb the higher cost of imported crude. Compare this to the Rs 60.73-71.86 per litre that distilleries are fetching for the ethanol they are supplying to OMCs. Simply put, ethanol derived from sugarcane, maize and rice is today cheaper than petrol refined from crude oil. It strengthens the case to incentivise the rollout of flex-fuel vehicles along with separate dispensing units in fuel stations for higher ethanol blends.

That said, global crude prices may not sustain at $110-per-barrel levels beyond a time. The ethanol industry must prioritise long-term cost competitiveness, which means raising cane and grain yields per acre and breeding varieties with higher sugar and starch recoveries. Nor should it expect the government to make available subsidised rice from the Food Corporation of India’s godowns.  Also, it’s not desirable to produce ethanol from water-guzzling rice. More effort is required to promote sweet sorghum, bajra and other millets as sustainable feedstocks for ethanol production, offering fermentation efficiencies comparable to maize or sugarcane. There’s no doubt, however, that the current oil shock is an inflection point for biofuels — and for Indian policymakers to think beyond incremental ethanol blending. The time for flex fuels has, indeed, arrived.