E20 Ethanol Blending

Context:

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.

Ethanol Blending Programme (EBP)

Launched: 2003; scaled up significantly after 2014.
Objective: To blend ethanol with petrol to reduce fossil fuel dependence, save foreign exchange, and cut carbon emissions.
Target:
- 10% blending achieved in June 2022 (ahead of target of Nov 2022).
- 20% blending target by 2025-26 (advanced from 2030).
Feedstock for ethanol: Sugarcane-based (molasses, sugar, juice, B-heavy molasses) and non-sugarcane-based (damaged food grains, maize, surplus rice from FCI).
Benefits:
- Reduces crude oil imports (saves ~?41,500 crore forex in 2022).
- Boosts farmers’ income (diversion of surplus grains/sugar).
- Lowers vehicular emissions (CO? reduction).
- Creates rural employment and investment in distilleries.