Ethanol should be a cheaper fuel. So why isn't E20 priced lower than pure petrol? Here's what the government says

The debate over E20 petrol continues as the government signals that India's ethanol blending programme is being planned well beyond the current 20% blending target.

In a written reply to an unstarred question in the Rajya Sabha on Monday, Minister of State for Petroleum and Natural Gas Suresh Gopi said the country's ethanol production capacity has reached about 2,000 crore litres per year and has been developed keeping future requirements in mind.

"The ethanol production capacity created in the country has been planned not only to meet the current requirement for E20 blending but also to cater to future growth in petrol demand, provide operational flexibility during seasonal variations in feedstock availability and support higher ethanol blends, flex-fuel vehicles and other emerging biofuel applications, as and when approved by the Government," the minister said.


Amid the government's push for higher ethanol blending, one of the biggest questions raised by critics is why E20 petrol is not cheaper than pure petrol.

In a press release issued earlier this month, the government explained that ethanol is not necessarily a lower-cost fuel under current market conditions.

"The Government ensures that farmers receive a fair price for the ethanol supplied under the programme. For example, maize-based ethanol is procured at around Rs 71.86 per litre, even before GST, transport, and storage costs are added. When global crude oil prices are around USD 70 per barrel, producing E20 can cost as much as, or even more than, pure petrol. Ethanol becomes the cheaper option only when crude prices rise sharply, typically to USD 120 to 130 per barrel or higher," the government said.

The government added that consumers still benefit even if E20 is priced similarly to pure petrol.

"Nearly 20 percent of every litre of petrol sold in India is now domestically produced ethanol. Unlike crude oil, ethanol prices are not affected by Brent crude fluctuations, wars, or global shipping disruptions. This means that one-fifth of every fuel tank is sourced from a stable domestic supply, helping reduce India's exposure to global oil price shocks while strengthening energy security," it said.

The government also rejected the perception that India's shift to E20 happened too quickly, describing it as "calibrated progress, not a sudden leap."

"In 2021, India required around 500 to 600 crore litres of ethanol annually to achieve 10 percent blending. As fresh investments expanded production capacity, annual ethanol availability approached 1,200 crore litres. With adequate supply in place, advancing to 20 percent blending became a logical and responsible next step," the statement said.

Addressing questions on why consumers cannot choose between pure petrol, E10 and E20 at fuel stations, the government said offering multiple base fuels across the country would significantly increase costs and create logistical challenges.

"India runs over one lakh retail outlets through a vast network of refineries, terminals and pipelines. Stocking three separate base fuels nationwide would multiply costs and complicate quality control at every single outlet. Premium petrol is not a fair comparison. It is a small, additive-enhanced product sold at a premium in limited quantities, not a separate nationwide base fuel," the release said.

The government also pointed to the investments already made in the ethanol ecosystem.

"Public sector banks have financed close to Rs 1 lakh crore in ethanol plants, storage and logistics. Reverting to E10 now would strand this investment and hurt the farmers and entrepreneurs who built it in good faith," it added.

On concerns over fuel efficiency, the government acknowledged that some vehicles may experience a 3% to 5% reduction in fuel economy with E20. However, it said real-world mileage depends more on factors such as driving habits, tyre pressure, vehicle servicing and air-conditioner usage than on fuel type alone.

Citing examples from the United States, where E10 is standard and E15 is being expanded, as well as Brazil and Japan, the government said ethanol blending has become a globally accepted practice.