Mint Explainer | What India’s ethanol push means for carmakers, buyers

What does the move on ethanol blending mean?

Bringing E85 and E100 into the rules creates a formal framework for carmakers, policymakers and other agencies. The inclusion of these fuels officially in the rules does not mean that they will be immediately introduced into the market. Instead, this signals intent to move beyond E20. Mint reported on 20 April that the government is holding meetings through a working group on the subject, with representatives from oil marketing companies, automobile makers, and Union petroleum and natural gas ministry.

What should car buyers know about E85 and E100?

The introduction of such fuels in the market is still in the discussion stage. E85 and E100 cannot run on normal vehicles, which means car makers will need to roll out flex-fuel vehicles. Besides, oil marketing companies will need to build separate fuel stations for these.

For car buyers, experts suggest that ethanol blending can go beyond the current E20 in the near term, but a full-fledged flex fuel rollout is some time away.

“Statements on 100% ethanol should be seen as a directional signal from Union Road and Transport Minister Nitin Gadkari, not something to be taken literally in the near term, at least till 2030. We expect ethanol blending to increase to ~27–30% over time,” Subhabrata Sengupta, partner at Avalon Consulting, said.

What does this mean for carmakers?

Carmakers like Maruti Suzuki, Toyota Kirlosokar Motor and Hyundai Motor India are among the names which have access to flex fuel technology. The auto industry has previously highlighted that policymakers should stabilize ethanol blending at E20 and move to E85 and E100 for flex fuel vehicles instead of increasing the blend to E27, E30 etc which will require them to tweak engines for all cars.

Any incentive plans for flex fuel vehicles or directives on increasing blends will require carmakers to invest in developing and rolling out the new technology, as well as tweaking the engines to meet the higher blends.

Will flex fuel vehicles work in India?

The Automotive Research Association of India (Arai) has been evaluating higher ethanol blends since FY25, though the agency has not publicly disclosed the results of its studies. Past statements from carmakers and industry bodies have suggested that higher blends mainly drop the mileage of old cars, which have not been tweaked to meet the blends.

Brazil, which has seen commercial roll out of flex fuel technology over the past two decades, is often cited as an example that higher blends can work. To counter concerns of mileage drops with higher blends and flex fuels, Toyota has proposed rolling out flex fuel hybrid vehicles, which combine an E100-compliant engine and an electric battery pack, which together can increase performance.

“[Brazilian] market clearly differentiates between blended and unblended gasoline, with distinct pricing structures. In India, a more likely outcome is that premium (unblended) petrol will be priced higher, while ethanol-blended variants remain the standard offering,” Sengupta said.

Why ethanol producers will benefit

A faster shift to higher blends would boost ethanol makers who say capacity is underutilized. According to the Indian Sugar & Bio-Energy Manufacturers Association (Isma) data, there is about 2 billion litres of annual ethanol capacity, while procurement from oil companies has so far been limited to around 1 billion litres.

In an interview with Mint earlier, Isma director general Deepak Ballani said ethanol blends can be increased gradually from E21 to E27 as ethanol makers are ready to meet the demand.

“We expect the government to expedite the work on increasing blending in ethanol once the West Asia crisis is over. It will help cut dependence on crude oil imports,” Ballani said.