By Anuj Gupta
When India announced its ambitious target to roll out 20% ethanol-blended petrol (E20) by FY26, it seemed like a win on all fronts. It promised to reduce oil imports, strengthen energy security, cut carbon emissions, and boost farmer incomes. Yet on the ground, the narrative has been more complicated. Concerns over reduced mileage, potential engine wear, and rising fuel costs have made ethanol blending a contentious issue, especially among India’s urban middle class, a price sensitive demographic. India doesn’t need to choose between sustainability and affordability. A smarter, more flexible approach would be to open trade infuel ethanol, maintain mechanisms to protect farmers, and adopt technological solutions to check evaporative emissionsto the ethanol story work better for all.
The government’s 2018 National Biofuel Policy prohibited ethanol imports to promote domestic production and augment farmers’ incomes. But as demand rises, feedstock supply hasn’t always kept pace. Sugarcane and maize are subject to seasonal fluctuations, and price spikes often follow poor monsoons or higher diversion to food use.
This is where a seasonal Tariff Rate Quota (TRQ) mechanism can play a mitigating role. Allowing limited, temporary ethanol imports during production shortfalls without undermining domestic suppliers can stabilise prices and maintain blending targets. Globally traded ethanol costs about 50 per litre, significantly lower than domestic ethanol derived from C-heavy molasses (62), B-heavy molasses (66, or even maize (77). With logistics factored in, imported ethanol remains more competitive. The savings from lower price of imported ethanol can be split between farmer’s welfare and lower prices forfuel consumers resulting in a win-win proposition.
Ethanol feedstock production is inherently seasonal. Sugarcane, molasses, and grains are harvested at different times, sugarcane crushing peaks in winter, while grain availability depends on kharif and rabi cycles. This creates periodic surpluses and shortfalls in ethanol supply, even as blending demand remains steady throughout the year.
To manage this mismatch, a calibrated TRQ mechanism linked to domestic supply conditions and seasonal shortfalls can be implemented. Under this framework, a limited quantity of ethanol could be imported during lean production months, between July and October when sugar mills slow output. Once domestic production recovers, higher duties or complete import cut-offs would automatically apply. This ensures imports act only as a stabilising measure, not a substitute for domestic production.
By tying quotas to real-time production assessments, TRQs preserve farmers’ market share while preventing ethanol shortages that could disrupt E20 blending targets. The mechanism provides flexibility to bridge temporary supply gaps without distorting prices or discouraging investment in domestic capacity.
Benefits to be produced from India’s ethanol production expansion
As India’s ethanol production expands and stabilises, the dependence on such quotas can gradually decline, making TRQs an interim yet vital policy tool to maintain year-round blending and safeguard farmer welfare. Ethanol trade could also serve as a strategic sweetener in India-US relations. As both nations negotiate a broader Bilateral Trade Agreement (BTA), allowing limited ethanol imports could be positioned as part of India’s energy purchases from the US, a diplomatic win-win. Indian consumers benefit from stable prices, American farmers find a new export market, and bilateral ties deepen under a mutually beneficial energy trade regime.
While ethanol helps India move toward cleaner fuels, complementary technologies like Onboard Refuelling Vapour Recovery (ORVR) can make this transition even more effective and affordable. This is a built-in system in vehicles that captures fuel vapours escaping during refuelling, vapours that would otherwise be lost to the air as pollutants and greenhouse gases.
India’s current dependencies
Currently, India relies on older Stage II vapour recovery systems at fuel stations. They depend on expensive infrastructure, regular maintenance, and strict enforcement, three things that are inconsistent across India’s thousands of privately operated petrol pumps. ORVR, installed directly in vehicles while manufacturing, prevents these losses at the source. Globally, this technology has been standard for decades in countries like the US and Japan.
India, which follows Euro emission norms, will benefit from ORVR since higher ambient temperatures in Indian cities causeshigher evaporative emissions. ORVR adoption will not only lower evaporative losses by up to 98%, but improve fuel efficiency and reduce urban air pollution, especially critical in cities like Delhi that are now choking under toxic smog. And with ethanol blends, it adds another layer of efficiency: ethanol is more volatile than pure petrol, so controlling vapour loss becomes even more important for safety and air quality.
India’s clean energy transition can’t succeed if it alienates consumers or burdens producers. Allowing capped ethanol imports through seasonal TRQs, paired with ORVR-enabled vehicles, strikes the right balance, protecting farmer incomes, supporting affordable fuel for consumers, and advancing India’s net-zero ambitions. The government’s ethanol rollout was designed to secure the future of both rural and urban India. But to keep that promise, it must remain adaptive.
A rigid “domestic only” ethanol policy risks making the programme vulnerable to supply shocks and political backlash. By embracing flexibility and technology together, India can transform ethanol from a contested issue into a shared national success, one that secures energy, supports farmers, strengthens trade, and clears the air for millions.
(The writer is India MD of BowerGroupAsia)
