The Indian government is actively defending its ambitious Ethanol Blended Petrol (EBP) Programme, particularly in light of questions regarding ethanol's procurement cost, which stands at approximately ₹71 per litre for Oil Marketing Companies (OMCs) during the current Ethanol Supply Year (November 2025 to October 2026).
Addressing queries in the Lok Sabha, the Centre clarified that the primary objectives of the EBP Programme extend beyond mere profit maximization for OMCs. Instead, the initiative is a strategic move designed to bolster India's energy security and provide vital support to the agricultural sector.
The Cost of Ethanol and Strategic Rationale
For the current supply year, OMCs are procuring ethanol at a weighted average ex-mill price of ₹66.61 per litre, excluding GST and transportation. When GST and transport are factored in, the cost rises to approximately ₹71 per litre, with minor variations among OMCs like IOC (₹71.18/litre), HPCL (₹71.10/litre), and BPCL (₹71.21/litre).
Minister of State for Petroleum and Natural Gas, Suresh Gopi, emphasized that the procurement framework is structured to ensure consistent ethanol availability, offer fair prices to producers, and support farmers. The government outlined several strategic objectives for the EBP Programme:
- Reducing Crude Oil Dependence: A significant goal is to lessen India's reliance on imported crude oil, thereby improving the nation's trade balance and economic resilience.
- Shielding Consumers from Price Shocks: Blending domestically produced ethanol helps cushion consumers against the volatility of global oil prices.
- Strengthening Energy Security: Utilizing local resources contributes to a more secure and stable energy supply for the country.
- Supporting Farmers: The program creates a consistent demand for agricultural feedstocks such as sugarcane juice, molasses, damaged foodgrains, and maize, providing a stable income for farmers.
- Lowering Vehicular Emissions: Ethanol blending is also promoted as a means to reduce harmful emissions from vehicles, contributing to environmental goals.
Impact During the West Asia Crisis
The government cited the recent West Asia crisis as a clear demonstration of the EBP Programme's benefits. During this period, global crude oil prices surged by 70-80%. However, domestic petrol prices in India increased by only around 7-8%.
Officials noted that had it not been for the availability of domestically produced ethanol and calibrated government interventions, the market price of petrol could have reached approximately ₹125 per litre when the Indian crude basket touched nearly $135 per barrel. Instead, consumers in Delhi paid around ₹94.77 per litre. Public sector OMCs absorbed an average under-recovery of about ₹11 per litre on petrol during this time, totaling approximately ₹21,300 crore.
Addressing E20 Concerns
Concerns about the safety and performance of vehicles running on higher ethanol blends (E20) were also addressed. The Centre reiterated that these blends were introduced only after extensive testing by reputable agencies, including the Automotive Research Association of India (ARAI), the Society of Indian Automobile Manufacturers (SIAM), oil marketing companies, and automobile manufacturers.
Currently, more than 23 crore vehicles in India, comprising over 20 crore two-wheelers and 3 crore petrol cars, are operating on higher ethanol blends without any verified evidence of widespread engine failures directly attributable to ethanol blending. Furthermore, manufacturers continue to honor warranty obligations for vehicles using E20 fuel, reinforcing confidence in its use.
In conclusion, the government views ethanol blending not merely as a cost-saving measure for OMCs, but as a crucial long-term strategic investment. It is an initiative designed to enhance energy security, reduce dependence on crude imports, protect consumers from global price fluctuations, support the agricultural sector, and contribute to lower emissions, aligning with broader national economic and environmental objectives.