New Delhi: Close on the heels of Union ministers Hardeep Singh Puri and Nitin Gadkari acknowledging that ethanol-blended petrol could indeed reduce vehicle mileage by 3-5%, triggering fresh questions over the economics of the programme, the petroleum ministry on Friday mounted an expansive defence of the country's ethanol blending initiative.
In a statement, the ministry argued that E20, or 20% ethanol-blended, petrol costs more to produce than the pure one, so it cannot be sold cheaper. The ministry also cited benefits for farmers, energy security, and evidence from global and domestic experience.
“Today, the Government purchases ethanol at remunerative prices so that Indian farmers are fairly compensated. Take maize-based ethanol. We have progressively increased its procurement price and today it is around ₹71.86 per litre, even before GST, transportation, storage and depot handling costs," the petroleum ministry said in a statement. Therefore, if international crude oil is trading at around US$70 per barrel, E20 is actually costlier to produce than pure petrol. If crude rises to US$120–130 per barrel, the economics naturally reverse and ethanol becomes even cheaper,” the statement said.
The statement comes in the wake of consumer complaints about the persistent high price of ethanol blends and the unavailability of pure petrol at pumps. They have also flagged issues in vehicle performance on blended fuel use, spare parts not being materially compliant with ethanol, concerns around potential denial of warranty claims, and adulteration of ethanol-blended fuel.
On 5 June, the government also launched the E85—or 85% ethanol-blended—petrol priced ₹20 per litre cheaper than the E20 variant. The government then said ethanol blending was not being done to make petrol cheaper, but to insulate consumers from volatile supply and prices of international crude.
The ethanol industry has lauded the government's fuel blending push. “Ethanol prices in India are determined under a regulated framework that balances both farmer welfare and long-term energy security of India. The cost of producing ethanol is closely linked to feedstock prices, particularly sugarcane, whose fair and remunerative price (FRP) is fixed by the government and has increased over time. The Ethanol Blended Petrol (EBP) Programme continues because it delivers broader national benefits, including reduced dependence on imported crude oil, improved energy security and stable incomes for farmers,” said Deepak Ballani, director general of the Indian Sugar Manufacturers Association (Isma), an ethanol lobby group.
“Base petrol—which is E20 in India—has a base price. And in relation to that price, there should be benefits for higher blends, which is seen in the approximately ₹20 lower price of E85 fuel," said C.K. Jain, president of the Grain Ethanol Manufactures’ Association (Gema), another ethanol lobby group. "Gradually, the gap between the two will widen, with higher blends seeing further price benefits.”
The petroleum ministry statement also argued that ethanol blending was crucial to India's energy security, and that huge investments in ethanol infrastructure had already been made, and also that the blended fuel had undergone rigorous tests before being distributed.
“Over the past several years, public sector banks have financed nearly ₹1 lakh crore/yr of investments in ethanol production and associated infrastructure. Dedicated ethanol plants, distilleries, storage facilities and logistics networks have been created to meet India's blending targets," the ministry said. "If, after creating this capacity, we were to arbitrarily revert to E10, what happens to these investments? What happens to the surplus production capacity? What happens to thousands of crores invested by farmers, cooperatives, entrepreneurs, financial institutions and public sector companies in good faith based on a national policy?”
In its defence of blending, which also invoked automotive industry legend Henry Ford and his use of ethanol as the choice fuel for the Ford Model T, the government asserted India had not rushed its ethanol blending programme, but was able to reach blending targets faster because it has the advantage of learning from global examples such as Brazil. The Latin American nation has a significant share of flex-fuel compliant vehicles that can run on any ethanol-petrol blend.
To be sure, in the US , most petrol is E10, while in the EU, blending hovers in the 7-10% range.
Providing pure petrol or lower ethanol blends, such as E10 and E20, “ignores the realities” of India’s fuel distribution network made up of over 100,000 retail outlets and would “create an enormous logistical challenge, increase handling costs, complicate inventory management and reduce operational efficiency”, the ministry statement said.
‘Real world’ evidence
A former senior automobile industry executive, requesting anonymity, said vehicle engines are usually designed with a safety margin for ethanol blending, indicating that some E10-compliant vehicles may operate on higher blends within that scope.
“Hero MotoCorp has reported similar field experience. This real-world evidence is far more reliable than isolated anecdotes,” it said.
Consumers have raised concerns that E20 fuel damages rubber components, affects engines in older vehicles and that many vehicle manuals specifically mention "E10 compatible". Dismissing the issue, the ministry said: “Every few months, a new rumour surfaces: rubber hoses will fail, engines will seize, fuel tanks will corrode. None of these claims stand the test of scientific evidence” and a vehicle manual only reflects the fuel specification, such as “E10 compatible”, prevailing at the time it was certified, the ministry said.
“It does not mean the vehicle suddenly becomes unsafe if fuel standards evolve later after extensive scientific testing, engineering validation and regulatory approval. If that logic were applied universally, no country would ever be able to upgrade its fuel standards,” it argued.
The government reiterated that since a significant share of ethanol in the country is made from sugarcane (33%) or grains (67%), benefits from higher blending are automatically transferred to farmers. The government has transferred over ₹1.66 lakh crore directly into the hands of farmers due to the ethanol blending.
“When additional markets open and demand for their produce increases, that helps to improve price and, thereby, farmer incomes," said Ashok Gulati, an agricultural economist and a distinguished professor at the Indian Council for Research on International Economic Relations (Icrier). "But natural resources, especially water, needs to be carefully and efficiently used.”