The Big Push for Ethanol
The government's ambition is clear: reduce the nation's massive oil import bill, cut down on vehicular emissions, and boost the rural economy. The primary tool to achieve this is the Ethanol Blended Petrol (EBP) programme. India has already successfully
rolled out E20 fuel—a blend of 20% ethanol and 80% petrol—nationwide as of April 2026. The programme has delivered significant foreign exchange savings, estimated at over ₹1.44 lakh crore so far. The next frontier is promoting flex-fuel vehicles (FFVs), which can run on even higher ethanol blends, like E85 (85% ethanol). This policy is seen as a crucial bridge in India's energy transition, offering a cleaner alternative that utilises existing fuel station infrastructure, unlike the massive overhaul required for electric vehicles. Even as the government celebrates achieving its E20 target ahead of schedule, it recently informed the Supreme Court that the programme is still an "experiment," with the full impact to be clearer next year.
The Question of Cost and Mileage
For the average car buyer, the most pressing question is about cost. Flex-fuel vehicles are expected to be slightly more expensive than their petrol-only counterparts, with an estimated premium of ₹5,000 to ₹25,000, due to modified components and sensors needed to handle ethanol. The bigger concern is the running cost. Ethanol has a lower energy density than petrol—about 30% less. This means a car will burn more fuel to cover the same distance, resulting in lower mileage. While E20 fuel leads to a marginal mileage drop of 2-7% in compatible cars, higher blends like E85 can cause a more significant dip of 20-30%. This trade-off can negate the lower price of high-ethanol fuel. For instance, even if E85 is ₹20 cheaper per litre, the higher consumption can make the cost per kilometre more expensive than running on standard E20 petrol. Automakers have been asking for incentives to offset this for consumers.
Are the Cars and Fuel Available?
The dream hinges on a classic chicken-and-egg problem: fuel availability and vehicle sales. While most new cars sold since 2023 are E20 compatible, very few are ready for higher blends like E85. Manufacturers like Maruti Suzuki and Toyota have showcased flex-fuel prototypes, but mass-market adoption is yet to begin. A major roadblock is the lack of infrastructure. While E20 is now standard, finding a pump that dispenses E85 is nearly impossible outside of a few pilot stations in major cities like Delhi and Mumbai. As of 2024, India had only around 2,500 stations offering E20, compared to over 72,000 for conventional fuels, highlighting the scale of the challenge. Without a widespread and reliable network of E85 pumps, consumers have little reason to pay a premium for a flex-fuel car, and without the cars on the road, fuel companies have little incentive to invest in the infrastructure.
The Fuel vs. Food Dilemma
The ethanol that powers this dream primarily comes from sugarcane, maize, and other grains. While this provides an additional income stream for farmers, it has sparked a serious 'fuel versus food' debate. The Economic Survey 2025-26 raised concerns that the guaranteed demand and attractive prices for ethanol feedstocks are causing farmers to shift cultivation away from essential crops like pulses and oilseeds towards maize. This shift could threaten India's food security, reduce the supply of animal feed for the poultry and cattle industries, and increase the country's dependence on imported edible oils. Furthermore, some of the primary crops used, like sugarcane and rice, are incredibly water-intensive, raising questions about environmental sustainability, especially in a water-stressed country. The government is exploring second-generation (2G) ethanol, produced from agricultural waste like rice straw, which doesn't compete with food crops, but this technology is still in its nascent stages.
