India removes excise duty on higher ethanol blends to accelerate biofuel adoption

The Indian government has removed excise duty on higher ethanol blends, aiming to reduce the price gap with petrol and accelerate the adoption of flex-fuel vehicles. This policy shift is expected to unlock hundreds of crore litres of new ethanol demand, supporting India's expanding biofuel program.

Key Highlights

• Government removes excise duty on higher ethanol blends to boost biofuel adoption
• ISMA projects up to 300 crore litres of new demand with E25 blend adoption
• India's ethanol production capacity exceeds current demand by nearly 600 crore litres
• Industry calls for procurement price alignment with increased sugarcane FRP

Policy Details and Industry Response

The Indian Sugar & Bio-Energy Manufacturers Association (ISMA) welcomed the move, calling it a significant step for the ethanol blending program. The removal of excise duty lowers the tax burden on blended fuels compared to petrol, creating a more supportive environment for higher ethanol blends such as E22 and E25.

Deepak Ballani, Director General of ISMA, stated that this change strengthens the government's efforts to accelerate ethanol blending. ISMA reported that India's ethanol production capacity already exceeds current demand by nearly 600 crore liters. The sugar industry alone contributes about 900 crore litres of capacity.

Potential Impact on Ethanol Demand

ISMA estimates that transitioning to E22 blends could generate an additional 120 crore litres of demand. Moving to E25 could unlock as much as 300 crore liters. The policy aligns with broader government initiatives, including the rollout of E85 fuel and the promotion of flex-fuel vehicles, which can run on varying ethanol and petrol proportions.

ISMA noted that achieving higher ethanol blending depends on original equipment manufacturers (OEMs) increasing production of flex-fuel vehicles. Regulatory steps such as BIS certification and ARAI validation of higher blends are also necessary to support this transition.

Future Projections and Industry Needs

The industry body projected that if half of India's vehicle fleet becomes flex-fuel compatible by 2030, an additional 400 crore litres of annual ethanol demand could be created. ISMA also emphasized the need to align ethanol procurement prices with the roughly 20 percent increase in sugarcane Fair and Remunerative Price (FRP). The association said this alignment is crucial for industry viability, timely farmer payments, and sustaining the ethanol blending program's momentum.

The government has not yet announced any changes to procurement prices. ISMA views the excise duty exemption for E22 through E30 fuel variants as a major policy breakthrough that addresses key industry concerns.

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CarBike 360 Says

The removal of excise duty on higher ethanol blends marks a significant step in India’s transition toward cleaner and more sustainable mobility. By incentivizing biofuel adoption, the government aims to reduce import dependence, lower emissions, and strengthen the domestic agricultural economy. This move is expected to benefit both automakers and consumers while accelerating the country’s long-term energy security goals.