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Should India’s Ethanol Blending Policy be Continued?

D. Raghunandan

The mainstream and online media, and social media in particular, have been abuzz with controversy and comments from the vehicle-owning or driving public, experts and different sectional interest groups over the government’s roll out in Delhi and other cities of mandatory supply of petrol blended with 20% ethanol or E20, soon to be extended to the whole country.

The National Policy on Biofuels, as amended in 2022, is the current version being implemented, having gone through several avatars since first being mooted in 2009. The policy with an initial target of achieving 10% ethanol blending (E10) had subsequently targeted 20% blending (E20) by 2030.

With Oil Marketing Companies (OMC) having been successful in establishing relatively steady supply chains for bio-ethanol earlier than targeted, E20 has now been rolled out in 2025, five years earlier than anticipated.

The bio-ethanol being used is termed first-generation ethanol derived from plant-based resources through fermentation and distillation, at present mainly from food crops such as sugarcane, maize and rice.

The more advanced and environmentally better second-generation bio-ethanol from cellulosic material such as agri-residues is currently in early stages of development in India. Biofuels have long been touted as having multiple benefits even as a partial substitute for fossil fuels.

The government has been aggressively pushing back against criticism of the E20 rollout arguing that rollout of ethanol blended petrol is saving substantially on crude oil imports, reducing greenhouse gas emissions, providing additional income to farmers, and generating employment through ethanol extracting industries.

Above all, it is claimed that E20 blending is a non-disruptive technology in the sense that it can be introduced through existing fuel distribution infrastructure and can be used seamlessly in existing vehicles without major modifications. As we shall see, while all these claims have a germ of truth, all the claims are in fact open to question and serious concerns arise on several counts.

The loudest protests at present are from motorists, amplified in the media and social media, who have reported a substantial drop in fuel efficiency and mileage, rise in fuel expenditure and, especially in older vehicles, considerable damage to engines and other parts raising maintenance costs. Disturbed voices are also emerging about gains to some industries but losses to others, due to the increased focus on maize compared to sugarcane. Serious questions are being asked too about the impact of bio-ethanol blending on agriculture, on the environment, and on the food basket, again bringing to the fore the “food vs fuel” debate.

Fuel Efficiency and Mileage Drop

Vehicle owners have been complaining regularly and vociferously about drop in mileage, deteriorating drive quality and engine performance, and increased maintenance costs. While government has refuted these complaints, claiming that while slightly lower fuel efficiency is to be expected, this is not more that 1-6% depending on age of vehicle, compatibility with E20 and engine tuning for E20. On the other hand, as reported in media interviews, vehicle users have claimed up to 20% drop in mileage.

Government claims, said to be backed by different expert and industry agencies would be based, as per usual practice, on data from test conditions, whereas user perceptions would be based on real-world conditions and, as per the user interviews, observed data such as kilometers covered for a certain quantity of fuel filled.

The basic science, however, tells an incontrovertible story.

The calorific value (CV or energy content of a substance) of petrol is significantly higher than that of ethanol, so ethanol blended with petrol is bound to contain less energy than pure petrol of the same total volume. CV of petrol is 46.4 mega joules/kg, while CV of ethanol is 29.7 MJ/kg or 36% less energy. Simple arithmetic would tell us that, in order to get the same energy out of 10 litres of E20 fuel as contained in 10 litres of pure petrol, a user would have to fill about 8% extra E20 amounting to about Rs.70 extra for every 10-litre refill (Rs.910) at Delhi prices. That is a substantial loss to a motorist who may refill several times a month.

Further, this is total energy in the fuel, which may translate to an even smaller quantity of useful power under real world road and traffic conditions. A 10% loss reported by users is therefore a very reasonable claim.

Several experts and industry spokespersons have suggested that users be “compensated” by charging a lower price for E20. Cost of Ethanol is Rs.61 per litre for administered price to manufacturers including GST, whereas E20 is sold at the same Rs.91/litre, as was charged for pure petrol in Delhi. So why not charge less for cheaper E20 for petrol, thus giving an incentive to users in a highly price sensitive market?

Unfortunately, the user has been left with no choice, since price for both E20 and petrol is the same, and pure petrol would no longer be available anywhere after full E20 rollout.

This government has always taken full advantage of rising international oil prices to justify high prices at the pump and ad valorem taxes that go with it, but has never passed on drops in international prices to the consumer. It is now doing the same with ethanol-blended petrol as well, even though ethanol is much cheaper than petrol, leaving the user to pay more for the fuel and also face other costs. A multiple whammy!

Materials and Maintenance

Another cause for vehicle user complaints is additional costs arising from higher maintenance requirements and the need to make older vehicles compliant with E20 standards. As an alcohol which is also hygroscopic in nature, meaning that it attracts water, ethanol and E20 lead to higher corrosion of the fuel system especially in rubber tubing, gaskets, seals and other components such as the fuel filter, fuel pump etc. These require to be substituted by appropriate ethanol-compliant materials such as certain types of plastics. A one-time cost of around Rs.5-7,000 may be required, as also offered by a conversion kit from Maruti, or periodic maintenance costs to replace corroded parts which may also cause further damage. Further costs entailed could include more frequent replacement of fuel filters and engine oil.

As per government rules, all vehicles sold after 2023 must conform with E20 requirements, but compliance is unknown and enforcement has been largely absent. In any case, about 90% of vehicles on the road are of older vintage and are not compliant with E20, although some may be compliant with E10.

Statements by Ministers and officials in the media as well as in detailed releases through the Press Information Bureau have all tried to minimise this problem, whereas industry sources and specialist automobile publications have attested to these problems and added costs.

A major problem with the government’s EBP Policy is that it has only dealt with macro-level issues, and interests of some sections of industry involved in manufacture of ethanol, but has never viewed vehicle users as stakeholders, leave alone crucial ones. No attempt has been made to communicate with vehicle users and communicate to them steps they require to take to deal with the transition to E20. None of the facts discussed above are known to vehicle users who have been left groping in the dark!

Feedstocks and Impact on Food

There has been a massive shift in feedstock for ethanol, notably in the past few years under the amended Biofuels Policy, in the face of major supply constraints under earlier policies. Extensive analysis by this writer, and others, reported on earlier including in these columns, are not repeated but only briefly summarised here.

Main feedstock for ethanol in early years was sugarcane. Despite exportable surplus sugar in a few years, the margin between supply and domestic demand was always a delicate balance. Diversion of by-product molasses from sugar to ethanol put pressure on sugar availability and prices, and on other alcohol user industries, so much so that even E10 blending required import of ethanol in several years, defeating the entire purpose!

To tackle this, government unwisely permitted conversion of cane juice directly to ethanol, which only made matters worse! This policy was recently reversed.

From Ethanol Supply year (ESY) 2022-23, feedstock used for ethanol was hugely expanded to include a variety of food materials. Maize was included as a feedstock for ethanol along with “spoiled” rice in FCI godowns and some other minor crops. While maize was not used at all for ethanol in 2021-22, volume of ethanol produced from maize jumped from 315 million litres in ESY 2022-23 to a whopping 2,860 million litres in ESY 2023-24, accounting for 42 percent of the total ethanol produced! In ESY 2024-25, ethanol from various grains, especially maize, was over 51% of all ethanol.

This has had two major effects. The increased demand for ethanol, and from maize in particular, has led to a major shift in cultivation to maize, area under maize having risen by around 10% at the cost of other food crops such as oilseeds, millets and pulses, driven by the ethanol push and higher administered prices for it.

The rapid shift to maize as ethanol feedstock has badly impacted small poultry farmers and poultry feed industries, who earlier used up to 70% of maize produced and who are now facing shortfalls of 15% or more. India which used to export large volumes of maize to Bangladesh, Vietnam, Malaysia and Vietnam has now become a net importer! Export of corn to India by the US was a major driver of the US tariff war with India! Once again, the very logic of ethanol production has been turned on its head!

The threat to food supplies is also very direct. Rice and some millets are being increasingly used for ethanol. Yield of ethanol from rice is 450-480 litres per tonne, and from other grains 380-460 litres/tone, compared with about 225 litres/tonne from C-heavy molasses. While the rice is supposedly be only “spoiled” grains rotting in FCI godowns, in practice is may well have meant diversion of rice to ethanol, especially since the limits for use of ‘surplus” grains from FCI have recently been raised.

Emissions, too, are only viewed one-dimensionally. Only tailpipe emissions are being considered which are, of course, less from ethanol than from petrol, although several pollutants such as PM2.5 and CO do not decrease. On the other hand, other environmental damage is not being taken into account at all.

Area under sugarcane has also risen, including in water-stressed regions like Vidarbha, due to increased demand for ethanol. Sugarcane is a very water intensive crop, requiring about 250 tonnes per tonne of cane, leading to severe depletion of groundwater including in UP, the largest producer of sugarcane.

Production of sugar, alcohol and other products from molasses also generates heavy pollution, ranked third among the most polluting industries in India. According to authoritative sources, around 70% of surface water in UP is said to be polluted by wastewaters from sugar and related industries.

The issue here is clear. Since only a single objective, that of producing more and more ethanol is being considered by government, then other objectives such as food security, balanced crop production, and impacts on other sections in the farming and industrial sectors, are being ignored. The policy of ethanol blending of petrol is being used as a blunt instrument whose main supposed benefits are questionable. If so, should the EBP policy be continued at all?

[The writer is associated with the Delhi Science Forum and All India People’s Science Network. Courtesy: Newsclick, an Indian news website founded by Prabir Purkayastha in 2009, who also serves as the Editor-in-Chief.]

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The Hidden Costs of Ethanol Blending

Ayesha Minhaz

For nearly a decade, ethanol-blended petrol (EBP) has been promoted as a means to reduce India’s dependency on fossil fuel imports and to lower carbon emissions. It is also expected to help meet the country’s nationally determined contributions under the Paris Agreement. The push for increased ethanol production is further justified as a boost to rural economies and a potential source of employment generation.

First launched in 2001 as a pilot project, “5 per cent EBP” was adopted as a policy target in 2003 in nine States and four Union Territories. In 2006, it was expanded to 20 States and four Union Territories. The project did not take off for nearly a decade until the government introduced targeted measures and incentives.

The National Policy on Biofuels (first notified in 2018 and amended in 2022) permitted the use of multiple feedstocks (sugarcane, sugar syrup, damaged foodgrains, corn, agricultural waste, etc.), thereby expanding the scope of raw materials available to manufacture ethanol for EBP. The policy allowed for foodgrain surplus to be utilised, which has remained a contentious decision. It categorised manufacturing units as basic (first-generation ethanol) and advanced (second-generation ethanol) and set aside viability gap funding for the latter (Rs.5,000 crore, according to a 2018 Press Information Bureau note).

When the government launched the biofuels policy, ethanol blending in petrol in India was at 2 per cent. The 2018 policy proposed a 2030 deadline for 20 per cent blending. In 2022, the Central government advanced the deadline to the financial year 2025-26. However, achieving these targets has come at a huge cost.

Initially, an interest subvention scheme was launched in 2018 under which the Central government would bear up to 6 per cent interest on bank loans for five years, specifically to support molasses-based distilleries. By 2021, the scheme was expanded to include grain-based units.

The Central government also relaxed the tendering process and regulatory mechanisms to speed up clearances. The GST was slashed from 18 to 5 per cent, and regulated procurement prices (varying, depending on raw materials) were implemented. During years of surplus, grains are sold by the Food Corporation of India (FCI) to ethanol plants at subsidised rates.

Union Minister Hardeep Singh Puri signalled at a business summit in Guwahati in February this year that India was looking at increasing the EBP target beyond 20 per cent. There is speculation that it could go up to 30 per cent (E30) by 2030.

However, there are concerns about the EBP policy in general and ethanol-manufacturing units in particular. In Telangana and Andhra Pradesh, for instance, protests against ethanol plants have gained momentum.

Protests by residents affected by pollution

On June 4, villagers from Pedda Dhanwada in Jogulamba Gadwal district, Telangana, damaged an under-construction ethanol plant by setting fire to it. They had been protesting against the plant for several months fearing pollution, but officials dismissed their concerns, stating that a public hearing—an essential tool for people to register their concerns, grievances, and disagreements with the government’s decisions—was not necessary and that the land for the plant had been acquired through private transactions. Cases have been filed against the protesters, who remain defiant. Villagers view these “cases” as an act of oppression.

Take Lakshmaiah’s case, for instance. Lakshmaiah teaches at a junior college near Hyderabad. He is from Eklaspur village in Marikal mandal of Narayanpet district. About half a kilometre from his native village is Chittanur, an ethanol point that has become a bone of contention between the public and successive governments. Lakshmaiah and over 70 other people were named in an FIR following protests in October 2023. Although it has been more than 18 months since the FIR was filed, a charge sheet is yet to be filed, Lakshmaiah told Frontline.

In November 2024, protests in Dilawarpur mandal of Nirmal district, Telangana, escalated and eventually led to the scrapping of a proposed ethanol plant. However, Chittanur and nearby villages have been demanding the shutting down of an active ethanol plant.

“The plant is operating at a reduced capacity currently, but still, one can feel the stench at least 25 to 30 km away. Two wells are polluted, and the land near the factory is polluted. They said zero liquid discharge, but we know that is not the case,” Lakshmaiah said. The claim of zero liquid discharge has often been challenged by villages wherever ethanol plants are operational.

Promotion of EBP

To promote EBP, the Ministry of Environment, Forest and Climate Change (MoEFCC) shortened the timelines for terms of reference (ToR), initiated instant ToR for expansion projects, and diluted the public hearing provisions and other environmental checks, says a report of the expert committee of NITI Aayog titled “Roadmap for Ethanol Blending in India 2020-25”. Ethanol distilleries, however, fall under the “red category”, with a pollution score of over 60.

In Andhra Pradesh, activists of the Human Rights Forum (HRF) have meticulously documented the environmental concerns and violations associated with ethanol plants in the State. The documentation highlights that compliance with the existing mandates is another area of concern.

Ahead of the 2024 elections, residents of Gandepalli announced they would boycott the elections if their concerns about environmental pollution continued to be ignored. Located near Vijayawada, the ethanol plant in Gandepalli has been operational since 2008. For years, villagers have been complaining about the degradation of the soil and the discharge of untreated effluent.

In 2022, a Lokayukta inquiry confirmed that untreated effluents were discharged into the irrigation canal. It was also established that the plant had sunk borewells, which was against the conditions set for the environmental clearance. The Andhra Pradesh Pollution Control Board eventually levied a fine on the plant and directed it to rectify lapses. In January 2025, farmers and activists met Andhra Pradesh Chief Minister Nara Chandrababu Naidu and petitioned him to halt the construction of an ethanol plant in Arugolanu village, Krishna district. Local residents are concerned about both pollution and water usage by the plant, located about 200 metres from the Veeravalli channel of the Eluru Canal. The Veeravalli channel is the primary source of water in the region for all purposes: agricultural, industrial, and drinking.

“We gathered water inflow and usage data and estimated the water required by the plant. Nearly 0.01 tmcft of water from the Veeravalli channel [as per 2019-20 data] is available for public consumption and industries. However, according to our estimates, the plant would need 0.02602 tmcft of water,” Gutta Rohith, the State secretary of the HRF, told Frontline. “How can EBP be classified as clean energy when ethanol plants are so polluting?” he wondered.

Even when plants do not illegally tap or overconsume water, the water requirements of ethanol production remain a major concern because rice and sugar are water-intensive crops. One litre of ethanol (from sugar) needs about 2,860 litres of water, according to the NITI Aayog report.

Activists said that around 60 ethanol plants had got permits for construction in Telangana and Andhra Pradesh. “Currently, one is operational in Telangana, and we have seen the consequences. The rest are in varying stages of completion. We don’t even know the exact locations of some [seven or eight] of these plants,” said Kanneganti Ravi, a farm sector expert and member of the Telangana People’s Joint Action Committee. Ravi has played a significant role in the anti-ethanol movement.

Villagers, in some cases, are unaware of the nature of the manufacturing unit that is coming up in their locality. In Gummalladoddi of East Godavari district, villagers mistook ethanol for ittanalu (seeds in Telugu) because the words sound similar.

Activists like Ravi also demand substantiation of claims that farm incomes will double owing to EBP. “An ethanol plant cannot purchase rice or corn from local cultivators because they cannot purchase it at the MSP. They cannot buy it even from the local markets. They need subsidised rates to keep the plant viable,” said Ravi.

Ethanol distilleries pay the FCI Rs.22.50 for a kilogram of rice. Although this is lower than the retail price, their economic cost is Rs.39.75 a kg, which means the State should subsidise the balance.

“Complex trade-off between food and fuel security”

Meanwhile, India’s reliance on corn for ethanol production has turned it from a net exporter to a net importer, noted the Observer Research Foundation (ORF) in October 2024. In an essay published by the ORF, experts described food-crop-based ethanol blending in India as a “self-goal”. One of the concerns of the writers was that India’s ethanol-blending policy caused a “complex trade-off between food and fuel security”.

The push for corn-based ethanol in India is also hurting the poultry industry, which needs corn as feedstock. The competitive market has driven prices up, and stakeholders have pushed for the import of genetically modified (GMO) corn. Currently, India only imports non-GM corn. The June 20 annual biofuel report of the US Department of Agriculture (USDA) noted that to sustain the current target, India would need an “additional 7 million hectares of cultivated feedstock area”.

With trade deals up for negotiation, some industry experts anticipate pressure on India to import corn or even ethanol. Currently, India does not import ethanol for EBP.

A former chairman of the Andhra Pradesh chapter of the Confederation of Indian Industry told Frontline: “Ethanol faces a feasibility challenge due to the high costs and limited availability of raw materials. Sugarcane production in Andhra Pradesh has reduced substantially over the years. As a result, several units operate at less than 60 to 70 per cent of their operational capacity, resulting in losses.”

He blamed social protections and the Mahatma Gandhi National Rural Employment Guarantee Scheme for the slackening interest shown by workers in labour-intensive crops such as sugarcane. While the industry expert did not clarify whether government incentives are factored into the profitability calculations of ethanol plants, activists and other experts stress that subsidies are crucial to keep these plants operational. In addition to Central government support, individual States have their own policy frameworks.

In October 2024, the Andhra Pradesh government notified the Andhra Pradesh Integrated Clean Energy Policy, 2024, which will be valid for five years. Under the policy, besides Central government incentives, the State will reimburse 100 per cent of the SGST revenue (for the sale of ethanol) and provide 100 per cent reimbursement of power charges for all ethanol plants for five years. Land lease charges will be approximately Rs.15,000 per acre per year.

Further, second-generation ethanol plants will get a capital subsidy of 20 per cent on fixed capital investment (a maximum of Rs.1.5 crore per kilolitre per day [KLPD] capacity of the plant with a maximum capacity of 25 KLPD). With these incentives, the State aims to enhance its capacity to produce 1,500 KLPD of ethanol.

“Ethanol plants run on a ventilator with subsidies provided by the governments. Remove subsidies, and the industries will shut down,” Rohith said.

Ethanol blending may seem like a successful mission if one goes by only the targets achieved, but concerns about its long-term economic viability and environmental impact cannot be ignored. Activists are divided on whether the real challenge lies in merely tweaking the targets or in re-examining the idea itself.

[Ayesha Minhaz is a journalist, who currently works for Frontline magazine. Courtesy: Frontline magazine, a fortnightly English language magazine published by The Hindu Group of publications headquartered in Chennai, India.]