Ensuring affordable fuel for masses

WHEN INDIA ANNOUNCED its ambitious target to roll out 20% ethanol-blended petrol (E20) by FY26, it seemed like a win on all fronts. It promised to reduce oil imports, strengthen energy security, cut carbon emissions, and boost farmer incomes. Yet on the ground, the narrative has been more complicated. Concerns over reduced mileage, potential engine wear, and rising fuel costs have made ethanol blending a contentious issue, especially among India’s urban middle class, a price sensitive demographic. India doesn’t need to choose between sustainability and affordability. A smarter, more flexible approach would be to open trade in fuel ethanol, maintain mechanisms to protect farmers, and adopt technological solutions to check evaporative emissions to the ethanol story work better for all.

- ANUJ GUPTA

The government’s 2018 National Biofuel Policy prohibited ethanol imports to promote domestic production and augment farmers’ incomes. But as demand rises, feedstock supply hasn’t always kept pace. Sugarcane and maize are subject to seasonal fluctuations, and price spikes often follow poor monsoons or higher diversion to food use.

This is where a seasonal Tariff Rate Quota (TRQ) mechanism can play a mitigating role. Allowing limited, temporary ethanol imports during production shortfalls without undermining domestic suppliers can stabilise prices and maintain blending targets. Globally traded ethanol costs about $50 per litre, significantly lower than domestic ethanol derived from C-heavy molasses (62), B-heavy molasses (66, or even maize (77). With logistics factored in, imported ethanol remains more competitive. The savings from lower price of imported ethanol can be split between farmer’s welfare and lower prices for fuel consumers resulting in a win-win proposition.

Ethanol feedstock production is inherently seasonal. Sugarcane, molasses, and grains are harvested at different times, sugarcane crushing peaks in winter, while grain availability depends on kharif and rabi cycles. This creates periodic surpluses and shortfalls in ethanol supply, even as blending demand remains steady throughout the year.