Policy Update
Aakash Agrawal
1. Introduction
Ethanol blending mixing ethanol with petrol to reduce fossil fuel consumption is not a new idea in India; the Ethanol Blended Petrol Programme was first launched in 2003. What changed after 2018 was the scale of political and financial commitment behind it. The National Policy on Biofuels, 2018, replaced an earlier and more cautious 2009 policy, and was itself amended in 2022 to advance the 20 percent blending target from 2030 to Ethanol Supply Year 2025-26.
The policy sits at the intersection of three separate government objectives that do not always pull in the same direction: energy security (cutting India’s roughly 85 percent dependence on imported crude oil), farmer income support (creating an assured buyer for sugarcane, maize and surplus grain), and climate policy (lower tailpipe emissions). This paper treats those three objectives as independent variables and asks how well the programme has actually performed against each of them, rather than accepting the government’s own framing at face value.
India’s National Policy on Biofuels, 2018, and the Ethanol Blended Petrol (EBP) Programme it revitalised represent one of the fastest-executed energy transitions attempted by the Indian state in the last decade. Blending levels rose from roughly 1.5 percent in 2013-14 to 20 percent by mid-2025, five years ahead of the original 2030 target.
This paper examines the policy’s design, tracks its implementation performance against stated targets, and assesses the environmental and socio-economic trade-offs that have accompanied rapid scale-up, particularly the food-versus-fuel debate, water stress from feedstock cultivation, and the technical limits of pushing blending ratios beyond E20. It concludes that the programme’s speed has outpaced the framework’s own sustainability safeguards, and that the next phase (E27, E85, E100) requires more rigorous feedstock and water accounting than has been applied so far.
2. Policy Framework and Evolution
The 2018 policy categorises biofuels into ‘Basic Biofuels’ (first-generation bioethanol and biodiesel) and ‘Advanced Biofuels’ (second-generation ethanol from lignocellulosic and municipal solid waste, and third-generation biofuels from algae). Its stated purpose was to widen the range of feedstocks permitted for ethanol production — beyond sugarcane molasses to include damaged foodgrain, surplus rice, maize, sugar beet and rotten potatoes — and to open the door for public sector oil marketing companies (OMCs) to sign long-term offtake agreements with distilleries.
Three amendments and complementary schemes matter for understanding how the programme actually moved:
- 2020: The Cabinet Committee on Economic Affairs formally advanced the 20 percent blending target from 2030 to 2025, following the release of an Expert Committee ‘Roadmap for Ethanol Blending in India 2020-25’.
- 2022: The policy was amended to further expand feedstock flexibility and to allow export of surplus rice through the Food Corporation of India for ethanol production, and permitted use of B-heavy and C-heavy molasses, sugarcane juice and sugar syrup interchangeably depending on sugar season surplus.
- Pradhan Mantri JI-VAN Yojana: A dedicated scheme for second-generation (advanced) biofuels using agricultural residue and municipal solid waste, intended to reduce future reliance on food-grade feedstock.
- Financial instruments: An administered pricing mechanism for ethanol procurement, a reduced 5 percent GST rate on ethanol supplied for blending, Ethanol Interest Subvention Schemes (2018-22) offering interest subsidies for setting up distilleries, and Long-Term Offtake Agreements (LTOAs) between OMCs and Dedicated Ethanol Plants to guarantee demand.
This is a policy built primarily around supply-side incentives -de-risking capital investment in distillery capacity and guaranteeing offtake rather than around technology-forcing standards. That design choice explains both its speed (private capital moved quickly once demand risk was removed) and its principal vulnerability (feedstock is drawn overwhelmingly from irrigation-intensive food crops, since that is where existing processing capacity and supply chains already sat).
3. Implementation Performance
Measured purely against its own stated target, the programme has been a clear execution success. The 20 percent blending milestone was reached in 2025, five years ahead of the original 2030 deadline set in the 2018 policy.
| Ethanol Supply Year (ESY) | Blending Level Achieved | Milestone / Remark |
| 2013-14 | ~1.5% | Baseline year |
| 2019-20 | ~5% | Post-2018 policy push |
| 2021-22 | 10.17% | 10% target met 5 months early (June 2022) |
| 2022-23 | 12.06% | Steady scale-up |
| 2023-24 | 14.60% | |
| 2024-25 | ~19.05% (avg.), 20% by mid-2025 | 20% target achieved five years ahead of original 2030 deadline |
Source: compiled from Ministry of Petroleum and Natural Gas press releases and PIB statements, 2022-2025.
Government figures attribute cumulative savings of roughly ₹1 lakh crore to ₹1.65 lakh crore in foreign exchange, a reduction of over 500 lakh metric tonnes in CO2 emissions, and disbursement of well over ₹1 lakh crore in payments to sugar mills and grain-based distilleries over the life of the programme. Ethanol production capacity more than doubled in the four years to 2024, and E20-compliant fuel is now available at over 15,000 retail outlets.
Two caveats are worth stating plainly. First, these savings figures are government-reported and not independently audited in the public domain; they should be treated as directionally credible rather than precise. Second, the achievement is a blending-ratio target, not an energy-substitution target — because ethanol carries roughly 27 percent less energy per litre than petrol, a 20 percent volumetric blend does not translate into a 20 percent reduction in crude oil demand on an energy-equivalent basis, and vehicles running on higher blends require more fuel to cover the same distance.
4. Environmental Impacts
4.1 Claimed Benefits
Ethanol-blended petrol is associated with lower tailpipe emissions of carbon monoxide, unburnt hydrocarbons and particulate matter; government estimates cite reductions in carbon monoxide of around 30 percent in four-wheelers and 50 percent in two-wheelers at E20 relative to unblended petrol. Being a domestically produced, plant-based fuel also gives ethanol a theoretically lower well-to-wheel carbon footprint than imported crude, provided the feedstock is not itself produced at high water or land cost.
4.2 The Water Footprint Problem
This is the least resolved issue in the programme and the one most likely to constrain further scale-up. Sugarcane, India’s dominant ethanol feedstock, is water-intensive: producing one kilogram of sugar requires roughly 1,600 to 2,100 litres of water, and industry and independent estimates converge on a figure in the range of 2,500 to 3,000 litres of water per litre of sugarcane-based ethanol when full crop-water use is counted, rather than only the water used in the distillery itself. Rice, increasingly used as a feedstock following the 2022 policy amendment, has an even higher water footprint per unit of ethanol produced.
The ethanol industry’s counter-argument is that these figures conflate rainfall, general crop cultivation water and industrial processing water, and that most of this water would be used for agriculture regardless of whether the crop is destined for sugar, food or ethanol.
This is a fair technical distinction, but it does not fully answer the policy question: expanding the addressable market for sugarcane and rice by creating a new, price-guaranteed buyer (the ethanol programme) creates an incentive to sustain or expand cultivation of these crops in exactly the water-stressed states — Uttar Pradesh, Maharashtra, Punjab and Haryana — where groundwater depletion is already a first-order problem. Maize is a lower-water alternative, but Indian maize yields (roughly 3.5 tonnes per hectare) are less than a third of US yields (around 11 tonnes per hectare), meaning more land and water are required per litre of ethanol than headline crop-water numbers suggest.
4.3 Food Security and the Food versus Fuel Debate
India’s approach differs from the two dominant global models. Brazil’s ethanol programme is sugarcane-based but operates in a country with a food surplus and lower population density pressure on arable land; the United States’ corn-ethanol programme has repeatedly been criticised for its contribution to global food price volatility.
India, with a food-insecure population still numbering in the hundreds of millions by nutritional metrics, and with the 2022 policy amendment explicitly permitting diversion of surplus rice stocks (via the Food Corporation of India) and damaged foodgrain to ethanol production, is running a hybrid of both models without having fully resolved which risk profile it is accepting. Diverting rice stocks for fuel during a period when open-market food prices remain volatile is a policy choice with real distributional consequences for the poorest consumers, even if the diverted stock is technically classified as ‘surplus ‘.
4.4 Vehicle and Engine Compatibility
Ethanol’s hygroscopic (moisture-attracting) and corrosive properties can degrade rubber and metal components in older engines not designed for high ethanol content, and there have been documented consumer complaints about reduced fuel efficiency at E20. The government’s own roadmap acknowledged this and required auto manufacturers to certify E20-compatible engines, but the existing vehicle parc (older two-wheelers and cars) was not built for this blend, creating a transition cost that has been borne largely by consumers rather than the exchequer.
5. Emerging Challenges and the Push Beyond E20
Having reached E20 ahead of schedule, policy attention has shifted to E27 by 2030 and to enabling E85 and E100 flex-fuel vehicles through amendments to the Central Motor Vehicles Rules proposed in 2026. This is where the programme’s underlying tensions become sharper rather than resolved:
- Feedstock ceiling: Pushing blending ratios materially above 20 percent on a large vehicle fleet implies proportionally larger diversion of sugarcane, rice and maize, intensifying both the water-stress and food-price-volatility concerns rather than easing them.
- Second-generation ethanol has not scaled: the Pradhan Mantri JI-VAN Yojana was designed precisely to shift feedstock away from food crops toward agricultural residue and municipal solid waste, but commercial-scale lignocellulosic ethanol production remains at pilot/demonstration stage in India as of 2025, well behind the pace of first-generation capacity expansion.
- Regional feasibility is uneven: sugarcane- and rice-growing states can reach high blending ratios more easily than states without comparable feedstock access or distillery infrastructure, raising questions about whether a uniform national blending target is the right instrument, or whether state-differentiated targets would produce better outcomes.
- No formal decision has yet been taken by the Government of India on blending targets beyond 20 percent, even as production capacity and flex-fuel vehicle policy move ahead of that decision — a sequencing problem, since infrastructure and feedstock commitments are being made before the target itself is fixed.
6. Conclusion and Policy Recommendations
The National Policy on Biofuels, 2018, achieved what it set out to achieve on its own primary metric: blending ratio and timeline. That should not be understated — few Indian infrastructure or energy targets are met ahead of schedule. But the policy’s design prioritised speed and investor certainty over feedstock and water sustainability safeguards, and the bill for that sequencing choice is now coming due as the programme moves toward E27 and flex-fuel adoption.
Three recommendations follow directly from the evidence reviewed above, rather than from generic sustainability language:
- Before setting any blending target beyond 20 percent, the Ministry of Petroleum and Natural Gas and NITI Aayog should commission and publish an independent, state-wise water-footprint audit of ethanol feedstock cultivation, rather than relying on industry-supplied figures alone.
- Second-generation ethanol capacity (JI-VAN Yojana projects) should be tracked and reported against explicit capacity-addition milestones, with public disclosure of the gap between sanctioned and operational plants — the current absence of a public production dashboard makes it difficult to hold the advanced-biofuel commitment accountable.
- Any further diversion of foodgrain stocks (rice, wheat) to ethanol should be conditioned on a public buffer-stock threshold test, published in advance of the sugar/foodgrain season, so that food security is not treated as a residual claimant on surplus after fuel demand has already been contracted.
References
Ministry of Petroleum and Natural Gas, Government of India — press releases on Ethanol Blended Petrol Programme (2022-2025), pib.gov.in.
Ministry of New and Renewable Energy — National Policy on Biofuels, 2018 and 2022 amendment.
NITI Aayog / Ministry of Petroleum and Natural Gas — Roadmap for Ethanol Blending in India 2020-25 (Expert Committee Report).
USDA Foreign Agricultural Service — India Biofuels Annual Report, GAIN Report, 2025.
Policy Circle, Down To Earth, Counterview, Agro Spectrum India, The Logical Indian — commentary on food-versus-fuel and water-stress debates, 2025-2026.
About the Contributor
Aakash Agrawal is a Research & Editorial Intern at IMPRI. He holds a Bachelor’s degree in Architecture from the Manipal School of Architecture and Planning, Karnataka, and is currently pursuing a Master’s in Urban and Regional Planning at Dr. A.P.J. Abdul Kalam Technical University, Lucknow. His interests lie in urban policy, governance, and sustainable development, with a focus on implementation-oriented research that supports efficient, inclusive, and resilient cities.
Acknowledgement
The author extends his sincere gratitude to the IMPRI team for their invaluable guidance throughout the process.
Reviewers: Lubina Dua
Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.
