Indian ethanol producers are pushing for an increase in the fuel blending ratio and a mandate for flex-fuel vehicles, following the sharp rise in crude oil prices due to the ongoing war in West Asia.

India has already touched 20% blending in petrol, using ethanol made from maize, rice and sugarcane. Should it convert more food to fuel, and at what cost? Mint explores.

How has India’s ethanol blending programme progressed?

While addressing Parliament on the West Asia war on 23 March, Prime Minister Narendra Modi highlighted that ethanol blending in petrol went up from just 1-1.5% a decade back to 20% currently.

Ethanol, a biofuel made from agricultural crops, is now replacing about 45 million barrels of imported crude oil every year (total imports in FY25 were about 1803 million barrels).

As per the petroleum ministry, ethanol blending in petrol has saved India ₹1.44 trillion (in cost of imported fuel) between November 2014 and July 2025. The ministry also estimates that the programme has led to CO2 emission reductions, equivalent to planting 300 million trees. In addition, annual farm revenue of ₹40,000 crore is being generated via ethanol blending.

What are manufacturers lobbying for?

Ethanol makers can be grouped into two categories: those who produce it from sugarcane (primarily sugar mills) and others who have set up grain-based plants, which use maize and rice to produce ethanol. Together, they have set up an installed production capacity of over 20 billion litres, higher than the requirement of 11 billion litres for the E20 (20% blending) programme.

Saddled with excess capacity, manufacturers are demanding that India move towards a higher blending ratio, up to 27% blending, and scale-up adoption of flex-fuel vehicles that can run on E85/E100 fuels (E100 means 100% ethanol). This will reduce India’s import dependence and pave the way for self-reliance in energy, the argument goes.

So, what are the concerns?

Two-fold. Firstly, car users have complained that many vehicles purchased before 2021 are not compliant with higher blending ratios, which lowers fuel efficiency and can cause material damage to car parts due to ethanol’s corrosive nature (the government has termed these concerns as ‘misplaced’).

On the farm side, ethanol is reshaping crop choice, with farmers moving towards more water and fertilizer intensive cereals and sugarcane. Higher adoption of ethanol blending may push farmers to grow fewer oilseeds and pulses, where India is heavily dependent on imports.

Are farmers actually switching?

Yes. Farmers planted more maize, rice and sugarcane in kharif 2025, with area under these crops higher by 20%, 9% and 13%, respectively, compared to the previous five-year average (the increase was also driven by a robust monsoon).

Simultaneously, the area under pulses and oilseeds, such as soybeans, fell by 7% and 5%, respectively. While higher ethanol blending can reduce emissions on road, growing more cereals and cane can deplete freshwater reserves, besides increasing the subsidy burden due to higher use of chemical fertilizers, where India is dependent on imports (for both finished products and intermediate inputs like natural gas).

The imbalance on the farm (with farmers moving away from pulses and oilseeds which need less water and fertilizers), risks entrenching India’s dependence on edible oil imports and exposing domestic food prices to greater volatility during supply shocks (say deficit rains), warned the Economic Survey in January.

So, what else can India do?

Besides ethanol blending to reduce dependence on imported fuels, the other pathway is faster adoption of electric vehicles (EVs). Currently, EVs comprise a mere 3% of passenger vehicle sales, though adoption is higher for two-wheelers (6%) and three-wheelers (61%).

In comparison, over half of the new cars sold in China are electric. One reason behind low adoption in India is lack of adequate charging infrastructure. For instance, Uttar Pradesh, the most populous state, has only two charging stations per 1,000 EVs. The government has set a target to achieve 30% of new vehicle sales to be electric by 2030, which looks difficult as of now.

Adoption of EVs is critical as the road transport sector accounts for 12% of India’s energy-related CO2 emissions and is a key contributor to urban air pollution.­

Indian ethanol producers are pushing for an increase in the fuel blending ratio and a mandate for flex-fuel vehicles, following the sharp rise in crude oil prices due to the ongoing war in West Asia.

India has already touched 20% blending in petrol, using ethanol made from maize, rice and sugarcane. Should it convert more food to fuel, and at what cost? Mint explores.

How has India’s ethanol blending programme progressed?

While addressing Parliament on the West Asia war on 23 March, Prime Minister Narendra Modi highlighted that ethanol blending in petrol went up from just 1-1.5% a decade back to 20% currently.

Ethanol, a biofuel made from agricultural crops, is now replacing about 45 million barrels of imported crude oil every year (total imports in FY25 were about 1803 million barrels).

As per the petroleum ministry, ethanol blending in petrol has saved India ₹1.44 trillion (in cost of imported fuel) between November 2014 and July 2025. The ministry also estimates that the programme has led to CO2 emission reductions, equivalent to planting 300 million trees. In addition, annual farm revenue of ₹40,000 crore is being generated via ethanol blending.

What are manufacturers lobbying for?

Ethanol makers can be grouped into two categories: those who produce it from sugarcane (primarily sugar mills) and others who have set up grain-based plants, which use maize and rice to produce ethanol. Together, they have set up an installed production capacity of over 20 billion litres, higher than the requirement of 11 billion litres for the E20 (20% blending) programme.

Saddled with excess capacity, manufacturers are demanding that India move towards a higher blending ratio, up to 27% blending, and scale-up adoption of flex-fuel vehicles that can run on E85/E100 fuels (E100 means 100% ethanol). This will reduce India’s import dependence and pave the way for self-reliance in energy, the argument goes.

So, what are the concerns?

Two-fold. Firstly, car users have complained that many vehicles purchased before 2021 are not compliant with higher blending ratios, which lowers fuel efficiency and can cause material damage to car parts due to ethanol’s corrosive nature (the government has termed these concerns as ‘misplaced’).

On the farm side, ethanol is reshaping crop choice, with farmers moving towards more water and fertilizer intensive cereals and sugarcane. Higher adoption of ethanol blending may push farmers to grow fewer oilseeds and pulses, where India is heavily dependent on imports.

Are farmers actually switching?

Yes. Farmers planted more maize, rice and sugarcane in kharif 2025, with area under these crops higher by 20%, 9% and 13%, respectively, compared to the previous five-year average (the increase was also driven by a robust monsoon).

Simultaneously, the area under pulses and oilseeds, such as soybeans, fell by 7% and 5%, respectively. While higher ethanol blending can reduce emissions on road, growing more cereals and cane can deplete freshwater reserves, besides increasing the subsidy burden due to higher use of chemical fertilizers, where India is dependent on imports (for both finished products and intermediate inputs like natural gas).

The imbalance on the farm (with farmers moving away from pulses and oilseeds which need less water and fertilizers), risks entrenching India’s dependence on edible oil imports and exposing domestic food prices to greater volatility during supply shocks (say deficit rains), warned the Economic Survey in January.

So, what else can India do?

Besides ethanol blending to reduce dependence on imported fuels, the other pathway is faster adoption of electric vehicles (EVs). Currently, EVs comprise a mere 3% of passenger vehicle sales, though adoption is higher for two-wheelers (6%) and three-wheelers (61%).

In comparison, over half of the new cars sold in China are electric. One reason behind low adoption in India is lack of adequate charging infrastructure. For instance, Uttar Pradesh, the most populous state, has only two charging stations per 1,000 EVs. The government has set a target to achieve 30% of new vehicle sales to be electric by 2030, which looks difficult as of now.

Adoption of EVs is critical as the road transport sector accounts for 12% of India’s energy-related CO2 emissions and is a key contributor to urban air pollution.­