The government has acknowledged that E20 petrol is currently costlier to produce than pure petrol at prevailing crude prices and can reduce fuel economy by 3-5% in some vehicles, but defended the ethanol-blending programme as a long-term energy-security move aimed at cutting India’s exposure to imported oil.
The clarification comes amid a growing consumer backlash over 20% ethanol-blended petrol, with motorists raising concerns over lower mileage, possible impact on older vehicles and the absence of pure petrol or E10 at pumps. E20, a blend of 80% petrol and 20% ethanol, is now the standard petrol variant across the country.
The ministry of petroleum and natural gas said maize-based ethanol is procured at around ₹71.86 per litre, before GST, transport, storage and depot handling costs. At crude oil prices of around $70 per barrel, “E20 is actually costlier to produce than pure petrol,” the ministry said. The economics reverse when crude rises to $120-130 per barrel.
The government, however, argued that the policy should not be judged only by the daily cost comparison with petrol. Nearly 20% of every litre of petrol sold in India today is domestically produced ethanol, insulating part of the fuel basket from Brent crude volatility, geopolitical conflicts and shipping disruptions.
“Ethanol blending is therefore not about making petrol cheaper on a particular day,” the ministry said, adding that the larger objective is to reduce India’s exposure to imported crude oil.
Performance Trade-offs
The ministry also accepted that E20 may lower fuel economy by 3-5% in some vehicles, but said “mileage is only one parameter.” It argued that E20 offers higher octane, better anti-knock properties, faster combustion, improved pickup, smoother acceleration and cleaner engine operation. It also said the fuel produces negligible particulate emissions and reduces lifecycle carbon emissions by around 40%.
On vehicle damage concerns, the government said the transition was based on consultations with automobile manufacturers, oil companies, testing agencies and technical institutions. It said Maruti Suzuki serviced 2.84 crore vehicles in FY26, including 1.5 crore older non-E20-certified vehicles, and reported no E20-linked corrosion, abnormal wear or component-life damage. Hero MotoCorp reported similar field experience, it said.
The Centre also rejected demands for selling pure petrol, E10 and E20 separately. It said India operates more than one lakh retail outlets, supported by refineries, terminals, depots and pipelines, and maintaining multiple nationwide petrol streams would raise handling costs, complicate inventory management and reduce operational efficiency.
The government said blending levels have risen from around 8.1% in ESY 2020-21 to 10% in 2021-22, 12.1% in 2022-23, 14.6% in 2023-24, 19.2% in 2024-25 and 20% during November-June 2025-26. It said the rollout followed a phased programme that began with pilot blending in 2001, E5 rollout by 2006 and a notified policy framework in 2013.
The ministry said the ethanol programme has saved over ₹1.97 lakh crore in foreign exchange, substituted nearly 316 lakh metric tonnes of crude oil, reduced around 952 lakh metric tonnes of CO2 emissions and transferred more than ₹1.66 lakh crore to farmers.
It also cautioned that reverting to lower blends would put at risk investments in ethanol plants, distilleries, storage facilities and logistics networks. Public sector banks have financed nearly ₹1 lakh crore annually in ethanol production and associated infrastructure, it said.