Source: The post India faces challenges in expanding ethanol blending has been created, based on the article “What has been the impact of ethanol blending?” published in “The Hindu” on 18th August 2025. India faces challenges in expanding ethanol blending.
UPSC Syllabus Topic: GS Paper 3- Infrastructures- Energy,
Context:India has reached its target of blending 20% ethanol with petrol five years ahead of schedule under the National Policy on Biofuels. The government highlights benefits such as lower emissions, reduced oil imports, and higher farmer income. Yet, consumer concerns, environmental costs, and the transition to cleaner options remain debated.
For detailed information on Ethanol Blending Programme (E20 Blending)- Significance and Challenges read this article here
Consumer Reactions and Concerns
- Compatibility of Vehicles: Vehicles sold since 2023 carry E20 labels, showing fuel compatibility. Manufacturers, including Hero Motocorp, upgraded materials like rubbers and plastics in older vehicles to withstand ethanol exposure.
- Public Opposition: ALocalCircles survey across 315 districts found two in three petrol vehicle owners opposed E20. Only 12% supported it, citing reduced mileage and higher maintenance. Consumers demanded freedom to choose fuel type.
- Government’s Stand: The Centre admitted a marginal drop in efficiency, but argued better tuning and compatible materials can reduce it. Minister Hardeep Singh Puri dismissed criticism as a “vilification campaign” driven by vested interests.
- NITI Aayog’s Advice: NITI Aayog suggested compensating consumers for efficiency losses through tax incentives on E10 and E20, balancing policy goals with fairness to users.
Financial and Policy Dimensions
1.Foreign Exchange Savings: Since 2014-15, India claims savings of ₹1.40 lakh crore by petrol substitution with ethanol. This is presented as proof of blending’s economic success.
- PSU Contributions: Between 2020-21 and 2024-25, oil PSUs like IOC, BPCL, ONGC, Coal India, and GAIL contributed ₹1.27 lakh crore in dividends, about 42.3% of total non-banking PSU dividends.
- Limited Relief for Consumers: Despite a 65% fall in oil prices, PSUs reduced petrol prices by only 2%, while dividend payouts rose sharply. This raised concerns about whether the financial benefits reached the public.
Agricultural and Environmental Impact
- Dependence on Sugarcane: Ethanol output from sugarcane grew from 40 crore litres in 2014 to 670 crore litres in 2024. Farmers received ₹1.20 lakh crore since FY15. Yet, sugarcane cultivation requires 60–70 tonnes of water per tonne, stressing water-scarce regions.
- Groundwater Stress and Land Degradation: The 2023 Central Groundwater Board found excess groundwater extraction in Maharashtra’s sugarcane districts. The 2021 Land Degradation Atlas reported 30% of India’s land degraded, worsened by unsustainable farming and climate stress.
- Crop Diversification Efforts: FCI allocated 5.2 million tonnes of rice for ethanol in 2024, up from 3,000 tonnes earlier. 34% of corn output was diverted, forcing 9.7 lakh tonnes of imports in 2024-25, six times the previous year. Yet, sugarcane acreage rose to 57.24 lakh hectares.
- Future Outlook: The OECD-FAO estimates that by 2034, 22% of sugarcane will go to ethanol. The assured Fair and Remunerative Price (FRP) makes sugarcane an attractive crop, limiting a shift to sustainable alternatives.
Trade and Global Pressures
- U.S. Push for Imports: The U.S. has called India’s ethanol policy a major “trade barrier”. Relaxing restrictions could hurt domestic producers who invested heavily in ethanol capacity.
- Industry Response: The Indian Sugar Mills Association urged the government to maintain restrictions to protect India’s ethanol economy from foreign competition.
Ethanol and the EV Transition
- Emission Reductions: The Centre says blending reduced 700 lakh tonnes of CO₂. However, EVs promise greater emission cuts and faster transport decarbonisation, as shown in Beijing’s clean-air success.
- Slow EV Growth: In 2024, only 7.6% of vehicle sales were electric. To meet the 2030 target of 30%, sales must rise by 22% in five years.
- Rare Earth Dependency: India’s EV production depends on rare earth imports, mainly from China. Disruptions led Maruti Suzuki to cut EV targets, with other firms also facing delays. Diplomatic talks with Beijing aim to ease shortages.
- Policy Uncertainty: While Minister Puri signalled pushing beyond 20% blending, the government clarified in March that no decision has been taken yet, leaving future direction unclear.
Question for practice:
Examine the economic, environmental, and consumer challenges of India’s E20 ethanol blending policy.
