Ethanol’s Role in India’s Energy Future

• 17 May 2025

This editorial is based on “Taking ethanol blending beyond E20” which was published in The Hindu Business Line on 07/05/2025. The article brings into picture the progress of India’s Ethanol Blended Petrol (EBP) Programme towards the E20 target by 2025, while emphasizing the need for second-generation ethanol and feedstock diversification.

For Prelims: India's ethanol-blending programme, PM-JI-VAN Yojana, National Bio-Energy Programme, Food Corporation of India, Minimum support price, National Mission on Sustainable Agriculture, PM Krishi Sinchayee Yojana,  Nationally Determined Contributions, Industries Development and Regulation Act.  

For Mains: Role of Ethanol Blending in India's Energy Transition, Key Issues Associated with Ethanol Blending in India.

India's Ethanol Blended Petrol (EBP) Programme has become pivotal in the nation's green energy transition, with blending rates nearing 20% and positioning India to achieve its E20 target by 2025. While this milestone is significant, sustainable progression beyond E20 requires developing second-generation ethanol technologies that utilize agricultural residues instead of food crops. The sugar industry remains central to India's ethanol economy, but addressing feedstock diversity and developing flex-fuel vehicles are crucial next steps. Policy reforms including GST rationalization, differential pricing, and formula-based pricing models will be necessary to maintain growth.  

What Role does Ethanol Blending Play in India's Energy Transition?  

• Strengthening Energy Security by Reducing Oil Imports: Ethanol blending reduces India’s heavy reliance on imported crude oil, thereby enhancing energy self-reliance and insulating the economy from volatile global oil prices.  
  • This substitution lowers the demand for foreign crude, saving valuable foreign exchange reserves.  
  • Between 2014 and August 2024, India saved approximately ₹1 lakh crore in foreign exchange by substituting 181 lakh metric tonnes of crude oil with ethanol blends, marking a significant step towards energy security. 
• Mitigating Climate Change through Lower Carbon Emissions: Using ethanol-blended petrol reduces carbon dioxide emissions from the transport sector, aligning with India’s commitment to the Paris Agreement and its Nationally Determined Contributions (NDCs). 
  • Ethanol burns cleaner than fossil fuels, helping improve air quality and public health.  
  • The Ethanol Blended Petrol (EBP) programme has cut CO2 emissions by 544 lakh metric tonnes since 2014, supporting India’s climate goals and reducing urban pollution. 
• Empowering Rural Economies and Supporting Farmers’ Livelihoods: Ethanol production generates substantial rural income, providing an alternative revenue source for farmers, particularly in sugarcane and maize-growing regions.  
  • This biofuel economy enhances agricultural sustainability by promoting crop diversification and agro-industrial linkages.  
  • Since 2014, oil marketing companies have paid ₹87,558 crore directly to farmers, boosting rural prosperity and contributing to the government’s aim of doubling farmers’ incomes. 
• Driving Technological Innovation and Flex-Fuel Vehicle Adoption: The ethanol blending strategy stimulates automotive innovation by encouraging the development and adoption of flex-fuel vehicles (FFVs) that can run on higher ethanol blends. 
  • These vehicles facilitate a transition to cleaner mobility while maintaining performance and fuel efficiency.  
  • For instance, the government launched E100 fuel in 2024 with an octane rating of 100–105, ideal for high-performance engines, laying the groundwork for a more flexible and sustainable transport sector. 
• Advancing Circular Economy and Rural Bio-Hubs Development: Ethanol-integrated bio-hubs consolidate renewable energy streams such as bioelectricity, biogas, and bio-fertilizers, maximizing resource utilization and fostering rural circular economies. 
  • This multi-product model enhances energy access and rural employment, supporting sustainable development goals.  
  • Sugarcane-rich states are already witnessing investments in such bio-hubs, integrating ethanol production with broader bio-based economic activities. 
• Enhancing Market Stability through Policy and Pricing Reforms: Government interventions like lowering GST on ethanol to 5%, introducing interest subvention schemes, and deregulating interstate movement have created a stable and predictable ethanol market.  
  • These reforms encourage investment and capacity expansion in ethanol production. 
  • Public Sector Oil Marketing Companies (OMCs) have procured ethanol worth over ₹1.45 trillion since 2014, signaling sustained government commitment and market growth. 

What are the Key Issues Associated with Ethanol Blending in India?  

• Food vs. Fuel Security Conflict: The diversion of food crops like sugarcane, maize, and surplus rice towards ethanol production raises serious food security concerns, risking inflation and supply shortages.  
  • This intensifies the trade-off between meeting energy goals and ensuring affordable food availability. 
  • For instance, India became a net importer of corn in 2024 after decades of exports, driven by increased maize demand for ethanol. 
• Environmental and Water Stress from Feedstock Cultivation: Sugarcane-based ethanol production is highly water-intensive, aggravating groundwater depletion in already vulnerable states like Maharashtra and Uttar Pradesh.  
  • This ecological cost threatens long-term sustainability and rural livelihoods dependent on water availability.  
  • Niti Aayog's report explains that a litre of ethanol produced from sugarcane consumes at least 2,860 litres of water in the process, worsening water stress during years of erratic monsoons and droughts. 
• Supply Chain and Feedstock Availability Challenges: Fluctuating availability of traditional feedstocks like sugarcane and FCI rice creates supply bottlenecks, risking ethanol production targets and blending rates.  
  • Recent pest infestations and late rainfall have caused a decline in sugarcane output in 2024, highlighting the vulnerability of ethanol blending targets due to increased dependency on inconsistent feedstock supplies. 
• Impact on Vehicle Fuel Efficiency and Consumer Costs: Higher ethanol blends like E20 can cause a 6–7% drop in fuel efficiency in vehicles not specifically designed for them, increasing the operating cost for consumers.  
  • This efficiency loss could offset fuel price benefits unless matched with Flex Fuel Vehicle rollout.  
  • Without the widespread adoption of vehicles that can efficiently handle higher ethanol concentrations, consumers may experience increased fuel consumption.  
    • Additionally, the higher ethanol content could lead to more frequent fueling, further increasing the overall cost burden on drivers. 
• Infrastructure and Logistics Constraints: Inadequate ethanol storage, blending facilities, and supply chain infrastructure limit the efficient distribution and blending of ethanol across states.  
  • State-level regulatory controls on ethanol movement hinder interstate supply, complicating the blending program’s scale-up as most states are imposing 'Export/Import' duties on ethanol, leaving and entering their boundaries 
  • Amendments to the Industries Development and Regulation Act to facilitate the free movement of ethanol across states are recent steps but implementation challenges remain. 
• Barriers to Petrol Price Reduction: Theoretically, ethanol blending should reduce petrol prices because ethanol costs less than petrol due to lower taxes and production costs.  
  • Despite this, retail petrol prices have yet to fully reflect these savings, partly due to market and taxation structures.  
  • Studies estimate that at 15–20% blending, petrol prices could fall by Rs 3.5 to Rs 8 per litre, potentially easing the financial burden on consumers while promoting cleaner fuel use. 

What Measures can India Adopt to Enhance Sustainability and Efficiency of its Ethanol Blending Programme? 

• Diversify Feedstock Portfolio with Emphasis on Non-Food Biomass: Promote large-scale adoption of second-generation (2G) ethanol technologies utilizing agricultural residues, forestry waste, and industrial by-products to reduce dependence on food crops and alleviate the food vs. fuel conflict.  
  • Integrating this with the Pradhan Mantri JI-VAN Yojana’s expanded scope can accelerate investment and innovation in sustainable feedstock sourcing. 
• Implement a Transparent, Dynamic Pricing Mechanism Linked to Input Costs: Establish a formula-based ethanol pricing system that reflects real-time feedstock costs and production efficiencies, ensuring fair remuneration for producers while maintaining cost competitiveness.  
  • This would replace static administered pricing, incentivizing producers to optimize operations and scaling production sustainably. 
• Accelerate Flex-Fuel Vehicle (FFV) Penetration Through Policy Incentives:  Introduce targeted subsidies, tax rebates, and mandatory FFV production quotas for automakers to stimulate market supply and consumer adoption of vehicles capable of running on higher ethanol blends.  
  • Complementing the PM E-DRIVE (that is driving electric mobility ) can create a synergistic cleaner mobility ecosystem in India. 
• Expand and Modernize Ethanol Storage and Distribution Infrastructure: Invest in building decentralized ethanol storage tanks, blending terminals, and robust supply chain logistics to enable seamless interstate movement and consistent availability. 
  • Amending regulatory bottlenecks via the Industries Development and Regulation Act should be paired with digital monitoring systems for efficient inventory management. 
• Promote Water-Efficient Feedstock Cultivation Practices: Encourage adoption of precision agriculture, drip irrigation, and drought-resistant crop varieties for sugarcane and maize cultivation to reduce water footprints and environmental stress. 
  • Linking these efforts with schemes like the Pradhan Mantri Krishi Sinchayee Yojana can enhance resource efficiency and farm-level sustainability. 
• Foster R&D in Ethanol-to-Hydrogen and Sustainable Aviation Fuels:  Support innovation in ethanol conversion technologies to produce green hydrogen and sustainable aviation fuels, expanding ethanol’s utility beyond blending into advanced energy sectors.  
  • Public-private partnerships under the National Bio Energy Programme can catalyze breakthroughs and commercial viability. 
• Integrate Circular Bioeconomy Models in Rural Areas: Develop ethanol-centric bio-hubs that integrate bioelectricity, biogas, and organic fertilizer production from waste streams, creating a rural circular economy that maximizes resource use and generates diversified income for communities.  
  • This approach aligns with the Government’s rural livelihood programs and energy access initiatives. 
• Launch Consumer Awareness and Infrastructure Development Campaigns:  Implement nationwide awareness programs highlighting the environmental and economic benefits of ethanol fuels, complemented by expansion of ethanol refueling stations in urban and rural markets.  
  • Collaboration with public sector OMCs and state governments can ensure infrastructure readiness to support increased consumption. 
• Encourage Sustainable Land Use through Crop Diversification Incentives: Offer financial and technical support to farmers for shifting from water-intensive sugarcane to less water-demanding and high-yielding feedstocks like cassava, thereby optimizing land use and mitigating environmental impact.  
  • This can be integrated with the National Mission on Sustainable Agriculture to balance energy and food security goals. 

Conclusion: 

India’s Ethanol Blended Petrol (EBP) programme is a crucial step toward energy security, climate goals, and rural economic growth. To ensure sustainable progress beyond E20, it's vital to invest in second-generation ethanol technologies and foster the development of flex-fuel vehicles. The Pradhan Mantri JI-VAN Yojana can accelerate these efforts by promoting sustainable biomass-based ethanol production, directly contributing to SDGs 7 (Affordable and Clean Energy), 13 (Climate Action), and 8 (Decent Work and Economic Growth). 

Drishti Mains Question:

Analyze the role of Ethanol Blended Petrol (EBP) in enhancing India’s energy security and reducing carbon emissions and discuss key challenges in scaling up ethanol blending in India.

UPSC Civil Services Examination, Previous Year Questions (PYQ)   

Q. Given below are the names of four energy crops. Which one of them can be cultivated for ethanol? (2010)

(a) Jatropha   

(b) Maize   

(c) Pongamia   

(d) Sunflower   

Ans: (b)   

Q. According to India’s National Policy on Biofuels, which of the following can be used as raw materials for the production of biofuels? (2020)

1. Cassava   
2. Damaged wheat grains   
3. Groundnut seeds   
4. Horse gram   
5. Rotten potatoes   
6. Sugar beet   

Select the correct answer using the code given below:   

(a) 1, 2, 5 and 6 only   

(b) 1, 3, 4 and 6 only   

(c) 2, 3, 4 and 5 only   

(d) 1, 2, 3, 4, 5 and 6   

Ans: (a)