New Delhi: The string of flex-fuel vehicle launches was meant to mark India's next phase of clean mobility. Instead, within weeks, policy moves by the Centre and the Delhi government have raised questions over the future of these vehicles that can run on petrol blended with up to 85% ethanol, fuelling concern among automobile and biofuel makers that policy uncertainty could slow investment and wider adoption of the technology.
On 3 June, Union road transport minister Nitin Gadkari and petroleum minister Hardeep Singh Puri attended the commercial launch of Hero MotoCorp's flex-fuel motorcycle in Delhi, boosting sentiment for the technology's adoption. A day later, India's largest carmaker Maruti Suzuki also launched its flex-fuel WagonR.
However, within three weeks, the Delhi government mandated it would allow only electric two-wheelers from April 2028, with a likely similar call for four-wheelers in future, clouding the prospects of flex-fuel vehicles. And even as manufacturers were still reeling under the Delhi government's announcement, the Centre rolled out its latest draft of fuel efficiency norms, which reduced the incentives for flex-fuel vehicles.
Under its latest proposals on the Corporate Average Fuel Efficiency (CAFE) regulations, the Centre reduced the ‘super credits’ incentive for flex-fuel vehicles compared to the previous draft despite lobbying by biofuel makers.
To help automakers meet their mandate, they get super credits or regulatory incentives that give cleaner vehicles more weight when their average fleet fuel efficiency is calculated. As per the latest proposal, while one electric vehicle (EV) is counted as 3, a flex-fuel vehicle will be counted as 1.1 vehicle, down from 1.5 in the earlier CAFE draft of September 2025.
Out of favour?
The latest policy moves have now deepened concerns over flex-fuel's prospects.
At least three industry experts said the policy uncertainty could hurt investments and adoption of the technology, suggesting that the immediate focus is unlikely to directly promote flex-fuel vehicles for the short term.
The Indian Sugar and Bio-Energy Manufacturers Association (Isma), had in April urged the government to retain the earlier incentive, warning of a hit to the industry's plans if it wasn't. “The association pointed out that the lower incentive structure could discourage car manufacturers from speeding up the rollout of flex-fuel vehicles," an Isma statement of 17 April said. "This slowdown could hinder ethanol demand growth at a time when the industry has built significant production capacity.”
The moves come on top of the government's decision to price E85 petrol—blended with 85% ethanol—only about 20% below that of E20, well short of the 30% discount sought by the automobile industry to make the technology commercially viable.
Since the launch of flex-fuel vehicles, India's aggressive ethanol-blending programme has come under intense scrutiny owing to consumer backlash over the reported impact on mileage and lack of cost benefit on ethanol-blended petrol.
Queries sent to the ministries of road transport, heavy industries, petroleum, and power on how the government looks to promote flex-fuel vehicles remained unanswered.
Track change
The policy changes on flex-fuel technologies under CAFE norms just nine months ahead of its scheduled enforcement in April 2027 can be a drag on the sector, experts said.
“When signals evolve rapidly, or differ between the Centre and States, companies naturally become more wary, hesitant and measured in committing fresh capital,” said Vinay Piparsania, founder at MillenStrat Advisory and Research. “A new vehicle programme is typically committed four to seven years before launch, with $300–500 million already invested in engineering, tooling, localization, supplier development, and manufacturing. Once those commitments are made, changing course is costly and disruptive.”
Hero MotoCorp, Bajaj Auto, TVS and Honda Motorcycle and Scooter India, Maruti Suzuki, Tata Motors PV, Mahindra & Mahindra, Hyundai Motor India and Toyota did not respond to emailed queries on the impact of such policy moves.
Discussions around flex-fuel vehicles and ethanol blending gathered pace after the outbreak of the West Asia war disrupted global crude markets, prompting the government to engage with automakers on accelerating the rollout of flex-fuel vehicles.
Soon after, Maruti Suzuki launched the WagonR Flex Fuel, while Hero MotoCorp introduced the HF Deluxe and Splendor+ flex-fuel motorcycles. The launches coincided with the government's announcement that 5,000 flex-fuel pumps would be operational by the end of next year, with the first one inaugurated in New Delhi last month.
And then came Delhi's dampener on flex-fuel vehicle ban.
An industry executive aware of discussions between the government and industry said that the West Asia war related push to promote clean fuel was not a factor for the new CAFE rules for flex-fuel or even electric vehicles.
“The West Asia war-related disruption hasn't been reflected in the policy yet. The decision to introduce super credits for flex-fuel vehicles was the government's own decision, which they brought in the September 2025 draft to perhaps promote the technology, but have reduced it in the July draft," the executive said. "This reduction is unlikely to have a material impact on the mathematical calculation on average fleet emission.”
Electric path ahead?
With EV sales growing across categories and the maximum benefits retained for the segment under CAFE, some experts suggest that policy direction is geared towards EVs.
In India's four-wheeler segment, EV sales grew 84% to nearly 200,000 units in fiscal year 2026, while electric two-wheelers were up 22% to 1.4 million units.
“The surrounding infrastructure for flex-fuel vehicles is inadequate presently, with a handful of retail outlets. At this point, the policy signals through CAFE norms, and even through state government policies indicating that government will only support, or not discourage, electric vehicles,” said Arun Malhotra, an automobile industry veteran. “Flex-fuel vehicles are in a very nascent stage, and building that ecosystem is not a short-term plan; it will take time.”
A third industry observer said that given the early stage of the flex-fuel technology and its limited advantage in reducing carbon dioxide emission, any major policy incentives to aggressively push it are unlikely.
“There is a global move towards electrification, which is happening, and India will have to align itself with these value chains. While flex-fuel vehicles can play a transitional role, they are unlikely to be a long-term bet," said Abhishek Saxena, a former public policy expert at Niti Aayog. "That theme appears to be playing out if we look at the latest developments.”