Ethanol blending: India should consider temporary cut to 15% from 20% target, says ICRIER

New Delhi: India should consider temporarily reducing ethanol blending in petrol to 15% from the current 20% target during years of severe feedstock shortages or sharp food-price pressures, according to a paper published by Indian Council for Research on International Economic Relations (ICRIER).

"The final safeguard should be flexibility in the blending rate itself," the paper said, adding that the 20% target can remain the long-term objective, while a temporary reduction to E15 could be considered in years when domestic ethanol availability becomes insufficient or the cost of maintaining E20 becomes disproportionately high in terms of food and feed prices.

The study comes as India has rapidly scaled up its Ethanol Blended Petrol programme, and achieved the 20% blending target in 2025-26, five years ahead of the original schedule, even as production of the main agricultural feedstocks used for ethanol - sugarcane, maize and rice - has grown much more slowly.


The brief said the food-versus-fuel pressure is already visible in sugar, where lower opening stocks, weaker production and diversion towards ethanol have coincided with a sharp rise in retail prices.

The authors also proposed allowing larger sugar imports during shortages. They suggested temporarily cutting duties on raw and refined sugar to around 10% and allowing imports of 3-4 million tonnes to augment domestic supply and cool prices.

The study also questioned the economics of using subsidised FCI rice for ethanol. Rice supplied to distilleries was priced at around ₹2,320 per quintal, compared with FCI's average acquisition cost of about ₹3,889 per quintal and an estimated economic cost of over ₹4,100 per quintal in 2025-26.

It said FCI rice should therefore remain a residual feedstock, used largely when stocks are genuinely surplus, rather than becoming a permanent pillar of the ethanol programme.

The report also called for greater flexibility in ethanol imports. The paper said that current ethanol economics do not adequately capture the full cost of subsidised fertiliser, electricity used for irrigation, water use and the opportunity cost of diverting food and feed crops.

In the longer term, it said India should accelerate the shift towards second-generation ethanol from crop residues and other non-food biomass, reducing the structural competition between food and fuel.