The government has abolished excise duty on petrol blended with higher proportions of ethanol. The exemption will apply to E22, E25, E27 and E30 fuel blends. However, most petrol consumers are unlikely to benefit from the move, as E20 petrol - the most widely used ethanol-blended fuel in the country - has been excluded from the tax relief.
E22, E25, E27 and E30 denote fuel blends containing 22%, 25%, 27% and 30% ethanol, respectively. The petrol content in these blends is 78%, 75%, 73% and 70%. In comparison, E20 contains 20% ethanol and 80% petrol. At present, the majority of petrol-powered vehicles on Indian roads are designed and tuned to run on E20 fuel.
To encourage the use of higher ethanol blends, automobile manufacturers have started introducing vehicles equipped with flex-fuel engines, although such models remain limited in number. Maruti Suzuki recently launched one such vehicle.
Since ethanol has nearly one-third lower energy content than petrol, price incentives are being considered to compensate consumers for the difference. Union Petroleum Minister Hardeep Singh Puri recently said that state-run oil marketing companies are considering pricing E85 fuel at Rs 20 per litre lower than E20 petrol.
The government's push for greater ethanol usage comes amid rising crude oil prices in the international market due to the Iran conflict. By promoting ethanol-blended fuels, the government aims to reduce the country's dependence on petrol and diesel consumption.
As part of this strategy, the government plans to establish 50 to 100 ethanol fuel stations in Delhi-NCR, Pune, Mumbai and Nagpur, and expand the network to 500 stations by the end of 2026.
Fuel prices have already risen sharply following the increase in global crude oil prices. Last month, petrol prices were raised by Rs 7.53 per litre and diesel prices by Rs 7.58 per litre. Prior to these increases, fuel prices had remained largely unchanged for nearly four years. Even when global crude oil prices declined, retail petrol and diesel prices in the domestic market remained stable.
Reacting on the government's decision, Bharati Balaji, Deputy Director General, All India Distillers Association (AIDA) said, "The Centre's decision to exempt E22, E25, E27, and E30 fuels from excise duty is a landmark step that will accelerate India's energy transition. For the distilling industry, this is a powerful demand-side signal, it creates a clear commercial pathway to deploy our surplus ethanol production capacity, which currently stands well above E20 programme requirements. AIDA has long advocated that fiscal incentives must keep pace with blending ambitions, and today's announcement does exactly that. It strengthens farmer incomes, reduces our crude import bill, and reinforces India's energy security at a time when global fuel markets remain deeply volatile. We urge state governments to complement this measure with aligned Tax structures so that the full benefit reaches both industry and consumers at the pump.”