Published Date: Feb 2024


The Modi government has set an ambitious target of reaching 20% ethanol blending with petrol by 2025 to cut oil import dependence and provide farmers with an alternate revenue source. Various efforts are underway to achieve this target in a phased manner over the next few years.

Ethanol Policy and Targets:

In December 2018, the government advanced the target of 20% ethanol blending to 2030 from the earlier target of 20% blending by 2025.

In February 2019, it announced that 10% ethanol blending will be achieved in petrol across the country by 2022. Currently, about 4-5% of petrol pool already has ethanol blended.

The government is ramping up the percentage in a phased manner - 10% blending by 2022, 12-15% by 2023 and 20% by 2025.

Ethanol extracted from damaged food grains like wheat, broken rice and rotten potatoes as well as sugarcane juice, sugar and B-heavy molasses is used for blending with petrol.

The decision to advance the target was based on a successful pilot program in 2017 that demonstrated ethanol blending up to 20% without affecting vehicle engines and fuel quality.

Challenges in Ramping up Production:

While the targets are ambitious, scaling up ethanol production to meet the policy goals is not without challenges:

Limited availability of feedstock: India produces around 33 million tonnes of molasses annually which places an upper limit on ethanol production. New feedstocks need to be tapped.

Logistical bottlenecks: Transportation of ethanol from surplus to deficit regions, handling additional production needs advanced infrastructure.

Increase in diversion of sugarcane/grains: Large scale diversion for ethanol may cause supply shortages and increased food prices if not balanced properly.

Investments required: Major investments are needed in distilleries and pipelines for higher blending capacities. Surpassing 20% blending would require technological upgrades also.

Government Support Measures:

To boost ethanol production and resolve issues, the government has taken several initiatives:

Higher Procurement Prices: The state-owned oil marketing companies (OMCs) have to purchase ethanol from producers at higher administered prices close to fuel prices. This ensures remunerative rates for farmers and investors.

Long Term Policies: Clear long term policies on procurement quantities and bulk buying gives producers price assurance for 2-3 decades of investment cycles.

Additional Feedstocks Allowed: To utilize surplus grains, damaged food crops and sugarcane juice are now permitted for ethanol production. This increases the availability.

Ethanol Infra Support: Setting up of new generation ethanol plants, distilleries, pipelines, rail and road infrastructure is supported through viability gap funding and interest subvention.

Ethanol India Scheme: INR 9000 crore scheme to set up 12 new 2G ethanol distilleries across India to help achieve ethanol blending targets.

Results and Benefits:

Because of the concerted efforts of center and states, ethanol production and blending in India has started showing results:

Ethanol production grew from 38 crore litres in 2013 to 302 crore litres in 2020-21. Sugarcane-based distilleries expanded capacity by 50%.

Oil companies have built the supply chain infrastructure of over 1500 pipelines across India to transport ethanol to depots for further blending in petrol.

The programme is already yielding economic benefits - saving foreign exchange, additional revenue to farmers, new green jobs.

Environmental protection due to reduced emissions from vehicles running on ethanol-gasoline blend. Use of renewable fuel addresses climate change.

It is a sustainable solution for India's long term oil needs and import reduction as domestic production scales up.

Concluding with the support measures and early benefits seen, India seems well on track to achieve 20% ethanol blending by 2025. Once the current hurdles around feedstock and infrastructure expansion are addressed, higher blending can definitely push oil import substitution further. The ethanol policy is making steady progress in transforming India’s transport sector into a more sustainable model.