The Indian government has announced a central excise duty exemption on petrol blended with higher concentrations of ethanol, specifically at 22%, 25%, 27% and 30% blending ratios.

The exemption, notified by the Ministry of Finance through gazette notifications issued on June 10th, applies to E22, E25, E27 and E30 petrol-ethanol blends. These variants will now receive the same nil excise duty treatment currently applicable to E20 fuel. The policy removes Central Excise Duty, the Road and Infrastructure Cess, and the Agriculture Infrastructure and Development Cess from these higher ethanol blends.

The Bureau of Indian Standards (BIS) notified the required fuel standards for E22, E25, E27 and E30 on May 19th, although none of the higher-blend variants are currently available at commercial fuel stations.

"Following the achievement of 20% ethanol blending under the EBP Programme, the new standard aims to promote cleaner transportation, enhance energy security, reduce crude oil imports, and support the agriculture sector," BIS stated following the standards notification.

The gazette notification follows India's formal launch of the E85 petrol-ethanol variant, a blend of 85% ethanol and 15% petrol, on June 5th, World Environment Day. E85 is priced approximately Rs. 20 (US$ 1 = Rs. 95.39) per litre lower than the widely available E20 variant. The excise duty exemption is expected to affect the commercial economics of higher-blend fuels for oil marketing companies and retailers once the necessary supply chain infrastructure has been established.

Industry comments on exemption

The All India Distillers Association (AIDA) stated that the government's decision could influence the development of India's biofuel sector.

AIDA, the representative body for India's distillery, ethanol and biorefinery sectors, stated that the measure addresses a commercial issue previously raised with the Ministry of Finance and the Ministry of Petroleum and Natural Gas. According to the association, the removal of these duty-related barriers is intended to affect the financial economics of higher ethanol blends and may influence the development of E85 and E100 fuel ecosystems over time.

S. Vijendra Singh, President of AIDA, stated that the decision reflects a move towards higher ethanol blending beyond E20.

"The exemption of E22-E30 blends from excise duty is a policy decision that indicates India's progression beyond E20 and towards the next phase of its biofuel programme," Singh stated.

The association added that the policy could influence investment in ethanol production capacity, demand for agricultural feedstocks such as sugarcane and maize, reliance on imported crude oil, and the development of flex-fuel vehicles, E85 fuel and other biofuel applications.

India's ethanol blending programme has expanded from 1.5% in 2014 to nearly 20% currently. According to AIDA, this growth has contributed to foreign exchange savings and additional income opportunities for farmers. The association further stated that the policy shift represents a move from a supply-driven framework towards a demand-driven market with a wider range of fuel-blend options.

Government considers gradual approach beyond E20

Despite policy support for higher ethanol blends, the government may refrain from immediately mandating higher levels of ethanol blending and instead allow consumers to decide whether to adopt flex-fuel vehicles, amid concerns that a rapid transition from E20 to E25 could affect the engines of existing vehicles.

Most cars and two-wheelers manufactured between 2012 and March 2023 were designed or certified to be E10-compliant, while those produced from April 2023 are E20 material-compliant, meaning they are designed to operate on petrol blended with up to 20% ethanol. However, only vehicles sold from April 2025 are fully E20-compliant.

The government is preparing standards for E22, E25, E27 and E30 fuels, allowing for up to 30% ethanol content in petrol. In addition, trials of E25-compatible vehicles are being initiated, a process expected to take time.

Automotive industry executives and experts have expressed concerns regarding the pace of the transition, particularly given the large number of pre-2025 vehicles currently operating on Indian roads. According to industry representatives, most existing petrol vehicles are not fully material- and fuel-compliant even with E20 fuel. Any mandatory increase in ethanol blending could therefore reduce fuel efficiency and increase maintenance costs for a significant proportion of vehicle owners.

According to NITI Aayog's 2021 report on the E20 roadmap, vehicles designed for E10 and calibrated for E20 are likely to experience a 1-2% reduction in fuel efficiency, although some users report a greater decline in mileage. Consequently, vehicles manufactured before March 2023 could experience a larger reduction in fuel efficiency if higher ethanol blending becomes mandatory.

Officials involved in preparing the report stated that any phased move beyond the mandatory 20% ethanol blending requirement would require upgrades to vehicle technology. One expert stated that encouraging the adoption of flex-fuel vehicles capable of operating on both E20 and higher ethanol blends would be preferable to introducing multiple grades of mandatory blending. Otherwise, vehicle engines would require modification to accommodate different grades of blended fuel.

The automotive industry has indicated that it is prepared to introduce flex-fuel vehicles. Maruti Suzuki and Hero MotoCorp have already launched products, while other manufacturers are preparing their own introductions. The industry has advocated a calibrated approach to increasing ethanol blending, a proposal that has gained support in states with substantial sugarcane production. The sugar industry has also advocated higher blending levels.

Experts have further suggested that providing separate dispensers for E20 and higher-blend petrol at fuel stations may be the most practical option, allowing vehicle owners to select the fuel best suited to their vehicles. They added that the government has partially addressed concerns regarding the affordability of E85 fuel by fixing its price at Rs. 82.12 per litre in Delhi.