A conflict is emerging in India’s energy sector as the ethanol industry seeks a 1-2% increase in blending beyond the current 20% mandate, which the automobile sector opposes, citing reduced fuel efficiency and no cost benefits for consumers.
A new tug-of-war is brewing in India’s energy landscape as the ethanol industry lobbies for a 1–2% increase in blending beyond the government’s current 20% mandate (E20). The automobile sector, however, is pushing back, warning that higher ethanol blends will reduce fuel efficiency and offer no benefit to consumers at the pump, said a report by the Economic Times.
Producers Want More Blend to Use Idle Capacity
The Grain Ethanol Manufacturers’ Association (GEMA) has urged the Centre to consider a modest rise in blending levels, arguing that nearly half of India’s grain-based ethanol capacity remains idle.
“The grain-based ethanol industry is struggling, with only about 50% of total capacity being utilised. Raising the blend by just 2% can help us achieve breakeven,” said C.K. Jain, president of GEMA.
Industry insiders say pressure from poll-bound Bihar, a key maize-producing state, could further strengthen the ethanol lobby’s case.
Automakers Say No Room for More
Automobile manufacturers have pushed back strongly against the proposal, saying the E20 petrol , comprising 20% ethanol and 80% petrol , already causes a 4–6% drop in mileage compared to pure petrol (E0).
“There is no consideration at present to raise the ethanol blend,” a senior auto executive told ET on condition of anonymity.
Automakers argue that most vehicles on Indian roads are designed for up to E20 tolerance, and higher blends could affect engine performance and durability.
Consumers See No Price Advantage
While the ethanol program has been hailed as a farm economy booster, with nearly ₹40,000 crore paid to farmers over the past decade for ethanol-linked crops, critics say consumers haven’t gained.
Oil marketing companies (OMCs) admit that E20 fuel production costs are higher, meaning no price advantage at fuel pumps , a sticking point as retail petrol prices remain elevated.
Excess Capacity and Future Targets
In the first procurement cycle (C1) of the 2025–26 ethanol year (Nov–Oct), grain-based producers offered 1,300 crore litres to OMCs, of which 750 crore litres were accepted.
The industry says this overcapacity stems from earlier government signals that blending levels would eventually rise to 25–30%. “More capacity is still being added,” Jain noted.
However, GEMA acknowledges that immediate transition to E25 or E30 is not practical. Instead, it proposes a small, phased increase within the tolerance level of existing vehicles to support industry viability.
The sector now awaits Niti Aayog’s upcoming roadmap outlining the next phase of India’s ethanol blending strategy. The roadmap is expected to address issues of distribution infrastructure, inter-ministerial coordination, and financial viability.
“The industry has already invested heavily to meet enhanced requirements and is ready to collaborate with stakeholders on infrastructure. But timely policies are critical to sustain the momentum,” Jain added.
Having achieved its 20% blending target for 2025, the ethanol industry wants India to follow Brazil’s model, where progressive blending ranges from E27 up to 55% under flex-fuel standards.
Key Points
- Ethanol producers seek 1–2% hike above E20 to use idle capacity
- Automakers cite up to 6% drop in mileage from higher blends
- Farmers gained ₹40,000 crore from ethanol-linked crops
- No consumer price relief as E20 costs remain high
- Niti Aayog to release new roadmap for blending policy soon