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What has been the impact of ethanol blending
E20 petrol, which contains 20% ethanol and is being sold by Indian oil refiners, has been much in the news lately. India has achieved its target to blend 20% ethanol per litre of fuel five years ahead of the target under the National Policy on Biofuels. Ethanol blending in India rose from just 1.5% in 2014 to 20% in 2025, backed by the government’s strong fiscal incentives to the sugarcane industry. While the government says ethanol blending achieves a range of goals such as cutting greenhouse gas emissions, bolstering farmers’ incomes and reducing India’s oil import bill, its benefits to the environment require closer scrutiny.
How are vehicle owners reacting to this change?
Vehicles sold in India from 2023 come with E20 stickers, indicating compatibility with 20% ethanol blended petrol. Additionally, manufacturers have addressed the concerns of those who own older vehicles. Hero Motocrop says in its website, “The material composition such as rubbers, elastomers and plastic components that are directly exposed to fuel also need to be changed to E20 compatible materials.”
However, according to LocalCircles, two in three petrol vehicle owners are against the E20 mandate. Only 12% of the 36,000 people surveyed across 315 districts are in favour of the switch. Critics cited a drop in mileage and increased maintenance costs. The survey urged the Union government to allow consumers to choose the type of fuel they want.
While the Centre admitted to a “marginal drop” in engine efficiency, it said this “can be further minimised through improved engine tuning and use of E20-compatible materials.” Minister Hardeep Singh Puri has called the consumer angst a “vilification campaign” facilitated by “vested, economic interests”. While the Union government attempts to defend its E20 policy, its own think tank, the NITI Aayog, has urged the government “to compensate the consumers for a drop in efficiency from ethanol blended fuels”, by way of “tax incentives on E10 and E20 fuel”.
According to the Minister, “since 2014-15 India has already saved more than ₹1400 billion in foreign exchange through petrol substitution.” But has the benefit been passed to the end consumer?
An analysis by The Hindu showed that Coal India Ltd, Oil & Natural Gas Corporation (ONGC), Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Gas Authority of India Ltd collectively contributed ₹1270 billion, or 42.3% of the total ₹3000 billion dividends the Union government received from non-banking Public Sector Undertaking (PSUs) between 2020-21 and 2024-25. IOC and BPCL together saw a 255% rise in their dividend payouts since 2022-23 and a 65% decrease in oil prices. However, the two PSUs only passed on a 2% decrease in petrol prices to the public.
What about the impact on agriculture?
Sugarcane-based ethanol supply has grown from 400 million litres in FY14 to nearly 6.70 billion litres, derived from about 9% of total sugar output, in FY24. The Union government says it has paid “over ₹1200 billion to farmers” since FY15. But how environmentally friendly is India’s dependence on sugarcane for ethanol?
About 60-70 tonnes of water is required to cultivate one tonne of sugarcane. Many sugarcane growing regions in India do not receive the 1,500 to 3,000 millimetre rainfall that is necessary for the crop’s optimal growth. This leads to groundwater extraction and unsustainable irrigation methods. A 2023 Central Groundwater Board report says that sugarcane growing districts in Maharashtra extract more groundwater than nearby regions. Distress among sugarcane growers in that State has been widely reported. Unsustainable agriculture practices accelerate land degradation. The Desertification and Land Degradation Atlas of India 2021 found that almost 30% of India’s land is degraded. The water intensive nature of sugarcane and the impact on ground water reserves at a time of extreme weather has been absent from the discussion on ethanol-blended petrol.
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