E20 Ethanol Blending

India has achieved the 20% ethanol blending (E20) target in 2025, five years ahead of the original target under the National Policy on Biofuels.

Ethanol Blending in India

• Historical Progress: Ethanol blending rose from 5% in 2014 to 20% in 2025, supported by strong fiscal incentives to the sugarcane industry.
• Government Claim: Achieved multiple objectives — reducing greenhouse gas emissions, enhancing farmers’ incomes, and lowering oil import bill.
• Savings: Since 2014–15, India has saved ?1.40 lakh crore in foreign exchange through petrol substitution.

Consumer Perspective

• Vehicle Compatibility: All vehicles sold from 2023 carry E20 compatibility stickers. Older vehicles require modifications (rubbers, elastomers, plastic components).
• Public Reaction: According to LocalCircles survey, two-thirds of petrol vehicle owners oppose E20 citing lower mileage and higher maintenance costs.
• Government Stand: Admits marginal drop in efficiency, which can be minimized through engine tuning and material compatibility.
• NITI Aayog’s Suggestion: Proposed tax incentives on E10 and E20 fuels to compensate consumers.

Agriculture and Environmental Concerns

• Sugarcane Dependence:
  • Ethanol supply increased from 40 crore litres (2014) to 670 crore litres (2024), using ~9% of sugar output.
  • Farmers received ?1.20 lakh crore payments since 2015.
• Water Stress:
  • 60–70 tonnes of water needed per tonne of sugarcane.
  • Maharashtra’s sugarcane districts over-extract groundwater (CGWB 2023 report).
  • Land degradation: 30% of India’s land degraded (ISRO’s Desertification & Land Degradation Atlas, 2021).
• Diversification Efforts:
  • FCI allocated 2 MMT rice for ethanol (2025), up from <3000 tonnes earlier.
  • 34% of corn output diverted to ethanol (2024–25), leading to 7 lakh tonnes corn imports.
  • OECD–FAO projects 22% of India’s sugarcane for ethanol by 2034.

Economic and Trade Dimensions

• • PSU Dividend Issue: Despite a 65% fall in oil prices, IOC & BPCL only reduced petrol prices by 2% while dividend payouts rose 255%.
  • US Pressure: The S. has pushed India to relax ethanol import restrictions; India has resisted citing domestic investment in ethanol industry.

Ethanol vs EV Transition

• EV Advantage:
  • EVs have greater potential for emission reduction and faster decarbonisation of transport.
  • India’s EV share was 6% in 2024, needs to rise to 30% by 2030.
• Rare Earth Challenge:
  • EV manufacturing dependent on REEs, largely imported from China.
  • India imported 2,270 tonnes REEs (2023–24); supply disruption led to reduced EV production plans (e.g., Maruti e-Vitara).

Way Forward

• Consumer-Centric Approach: Introduce tax rebates/subsidies for ethanol-blended fuels to offset efficiency loss.
• Sustainable Agriculture: Diversify ethanol feedstock to less water-intensive crops (maize, sorghum, agricultural residues); promote 2G ethanol technologies.
• Balanced Energy Transition: Ethanol blending must complement, not substitute, the long-term EV transition.
• Trade Safeguards: Maintain import restrictions on ethanol to protect domestic producers.
• Water Governance: Strict groundwater extraction norms in sugarcane-growing states.
• EV Supply Chain: Develop indigenous rare earth processing capacity; invest in battery recycling and alternatives to reduce import dependence.