The oil ministry has dismissed demands to make ethanol-blended petrol cheaper than regular fuel, stating that ethanol is currently costlier than petrol. This stance contradicts earlier expectations from a Niti Aayog report (2020-21), which suggested potential cost benefits when ethanol was priced lower than petrol.
Rising Procurement Costs
According to the ministry, the current weighted average procurement cost of ethanol, including transportation and GST, is ₹71.32 per litre. In comparison, a litre of petrol in Delhi costs ₹94.77, with a base price of ₹52.83 plus taxes and dealer commission. While petrol’s retail price is higher, ethanol’s procurement rate has outpaced earlier cost advantages.
Energy Content and Fuel Efficiency Concerns
Ethanol contains about 33% less energy than pure petrol, as per the US Energy Information Administration (EIA). In practice, this means vehicles using 10% ethanol-blended fuel (E10) experience about 3% lower mileage, while those using 20% blends (E20) may see up to a 6% drop in fuel efficiency. This has led to consumer calls for pricing adjustments to reflect reduced mileage.
Ministry’s Response to Efficiency Debate
The oil ministry rejected claims that E20 causes a “drastic” reduction in mileage, stressing that fuel efficiency depends on multiple factors, such as driving habits, engine conditions, and maintenance. It emphasised that the efficiency impact is moderate and does not justify lowering prices solely based on ethanol’s energy content.
Blending Targets and Market Implications
India has been pushing for higher ethanol blending in petrol to reduce crude oil imports and support domestic ethanol production, mainly from sugarcane and grain. The move aligns with long-term sustainability goals and farmer income support, but the higher procurement costs pose challenges for immediate consumer price benefits.
Global Context
In the US, E10 is the most common blend, while India is rapidly adopting E20 across retail fuel stations. The government aims to achieve a nationwide E20 rollout by 2025. However, unlike in some global markets where blended fuels can be cheaper, India’s cost structure currently keeps E20 prices in line with regular petrol.
