Ethanol Blending in India

India has achieved a 15% ethanol blending rate in 2024, progressing towards its target of 20% (E20) ethanol blending by 2025. This achievement marks a significant milestone in India's energy transition efforts, reducing fossil fuel dependency and enhancing environmental sustainability.

The ethanol blending in India is a key initiative aimed at reducing the country’s reliance on fossil fuels, curbing carbon emissions, and enhancing energy security. The Ethanol Blended Petrol (EBP) Programme, launched in 2003, has played a critical role in this transformation. By promoting ethanol blending in petrol, India has managed to save ₹1.1 trillion in foreign exchange and prevent the release of 50 million tonnes of CO₂ emissions.

While progress has been commendable, challenges such as feedstock shortages, water-intensive ethanol production, and supply chain inefficiencies need urgent policy interventions. To achieve the ambitious 20% ethanol blending target by 2025, India must focus on strengthening infrastructure, diversifying feedstocks, and ensuring technological readiness in the automobile sector.

• Definition: Ethanol blending in petrol involves mixing ethanol, a biofuel derived from plant-based sources, with petrol to create a cleaner and more sustainable fuel.

• Sources: In India, ethanol is primarily produced from sugarcane molasses, maize, rice, and other biomass sources.

• PM-JI-VAN Yojana: The Pradhan Mantri Jaiv Indhan-Vatavaran Anukool Fasal Awashesh Nivaran (PM-JI-VAN) Yojana is designed to promote the production of second-generation (2G) ethanol using agricultural residues such as crop stubble, bamboo, and forestry waste. The scheme offers financial aid and viability gap funding to establish 2G bio-refineries, helping curb stubble burning while advancing clean energy goals.

• National Bio-Energy Programme: This initiative aims to enhance biofuel production, including ethanol, biogas, and biomass-based power, to strengthen India’s renewable energy sector. It comprises various sub-schemes that support biomass cogeneration, waste-to-energy solutions, and advancements in bioenergy technology to reduce reliance on conventional fossil fuels.

• Interest Subvention Scheme: This scheme provides interest subsidies on loans to facilitate the establishment of ethanol production plants, covering 1G (sugarcane-based), 2G (crop waste-based), and grain-based ethanol. By reducing the financial burden on investors, the scheme encourages greater private sector participation and accelerates the growth of ethanol production infrastructure.

• GST Reduction on Ethanol: The Goods and Services Tax (GST) on ethanol supplied for the Ethanol Blended Petrol (EBP) Programme was slashed from 18% to 5%, making ethanol more cost-effective for Oil Marketing Companies (OMCs). This tax revision is intended to boost ethanol blending in petrol, decreasing dependence on crude oil imports and advancing India’s biofuel transition under the National Biofuel Policy.

• India achieved 10% ethanol blending ahead of schedule in 2022.
• As of 2024, the ethanol blending in India stands at 15%, with ongoing efforts to expand ethanol-dedicated fuel stations and develop E20-compatible vehicles.

Energy Security and Reduced Import Dependence

• India imports 87% of its crude oil, making it vulnerable to price fluctuations and geopolitical risks.
• Ethanol blending in petrol reduces import dependence, enhancing self-reliance in energy.
• Since 2014, ethanol blending has replaced 181 lakh metric tonnes of crude oil, saving ₹1.1 trillion in foreign exchange.

Reduction in Carbon Emissions and Air Pollution

• Ethanol contains oxygen molecules, enabling more complete combustion, which reduces carbon monoxide and particulate matter emissions.
• Since 2014, India’s ethanol programme has reduced CO₂ emissions by 544 lakh metric tonnes, supporting the country’s Net-Zero 2070 target.

Economic Growth and Rural Employment

• Ethanol production supports the rural economy, providing additional income for farmers through biofuel crops.
• ₹87,558 crore has been disbursed to farmers, and ₹1,45,930 crore has been paid to distilleries, generating rural employment.

Diversification of Cropping Patterns & Waste Utilization

• Ethanol production promotes a shift from water-intensive crops (like wheat and rice) to maize and sorghum, ensuring sustainable agriculture.
• The government permits Food Corporation of India (FCI) rice and maize for ethanol production, ensuring stable farmer incomes.

Foreign Investment and Industrial Growth

• The rapid expansion of ethanol blending in India has attracted ₹40,000 crore in new investments, strengthening the country’s biofuel infrastructure.
• The Global Biofuels Alliance (GBA), launched at the G20 Summit 2023, positions India as a global leader in ethanol trade and technology.

Strengthening Automobile and Fuel Infrastructure

• As of April 2024, E20 petrol is available at 13,569 PSU fuel stations across India.
• Automakers are developing E20-compliant engines, ensuring a smooth transition.

Water-Intensive Nature of Ethanol Production

• Ethanol production is heavily reliant on sugarcane, a water-intensive crop.
• NITI Aayog estimates that sugarcane and paddy together consume 70% of India’s irrigation water, raising sustainability concerns.

Impact on Food Security and Inflation

• Diverting food grains like rice and maize for ethanol production may reduce surplus buffer stocks, impacting food prices.
• The FAO 2023 report highlighted that large-scale biofuel production could tighten global food supply chains.

Limited Ethanol Production Capacity & Supply Chain Bottlenecks

• Some states lack adequate distilleries and blending infrastructure, leading to regional supply imbalances.
• Logistics challenges and high transportation costs affect overall efficiency.

Vehicle Compatibility & Technological Limitations

• India’s existing vehicle fleet is designed for E10 fuel; transitioning to E20 requires engine modifications.
• Retrofitting older vehicles remains a challenge.

Price Volatility & Financial Viability

• Ethanol production depends on government-fixed procurement prices, leading to uncertainty for investors.
• Ethanol has a lower energy content, leading to higher fuel consumption.

Environmental Concerns in Ethanol Production

• Ethanol distilleries generate large volumes of wastewater (vinasse), which can cause water pollution if untreated.

Heavy Dependence on Government Subsidies

• Ethanol production relies on interest subventions, tax exemptions, and differential pricing.

Read This Article Here: Decoding Pollution in India

• Expanding Feedstock Diversification: Reduce sugarcane dependence by promoting maize, sorghum, bamboo, and agricultural waste as alternative feedstocks. Strengthen the PM-JI-VAN Yojana to support second-generation ethanol production from non-food biomass.

• Strengthening Rural Distilleries & Decentralized Production: Establish bio-refinery clusters in grain-producing states to balance ethanol supply. Promote rural distilleries to reduce logistics costs, ensure uniform availability, and generate local employment.

• Enhancing Vehicle Compatibility & Fuel Infrastructure: Mandate the rollout of E20-compatible vehicles by 2025 while encouraging retrofitting older vehicles for ethanol use. Upgrade fuel distribution infrastructure to support higher ethanol blends.

• Ensuring Price Stability & Market-Linked Procurement: Set up an Ethanol Price Stabilization Fund to mitigate price fluctuations. Link ethanol procurement to market dynamics for sustained industry growth.

• Addressing Water Sustainability in Ethanol Production: Promote drip and micro-irrigation for ethanol-linked crops to optimize water usage and reduce strain on groundwater resources.

• Boosting Investment & Private Sector Participation: Expand FDI opportunities in biofuel R&D to attract private investment, drive technological innovation, and enhance ethanol production efficiency.

Read This Article Here: Giving Shape to India's Carbon Credit Mechanism

The ethanol blending in India is a game-changer for energy security, environmental sustainability, and rural economic growth. While challenges persist, policy interventions, decentralized production, and infrastructure development are crucial to achieving the publicized environmental targets.

Which company makes ethanol in India?

• Indian Oil Corporation (IOC)
• Bharat Petroleum Corporation Limited (BPCL)
• Hindustan Petroleum Corporation Limited (HPCL)
• Balrampur Chini Mills
• Praj Industries

What is the most common ethanol blend?

• The most common ethanol blend is E10. It is a mixture of 10% ethanol and 90% gasoline, also called gasohol

What ethanol is used for?

• Ethanol is used in beauty products, antiseptics products, solvents, food additives, alcohol manufacture, fuel etc.

Which ministry is responsible for Ethanol Blending Programme?

• Ministry of Petroleum & Natural Gas is responsible for the Ethanol Blending Programme.

Ace your Prelims preparation🚀

Practice unlimited year-wise, subject-wise PYQs here.