- Petrol with 22-30% ethanol blends exempt from excise duty to boost biofuel use
- BIS set new fuel-quality standards for E22 to E30 blends effective May 15, 2026
- India aims to reduce crude imports by expanding ethanol blending beyond E20 targets
The central government has exempted petrol blended with higher levels of ethanol from excise duty, extending tax support beyond the current E20 standard.
According to a government notification, cited in a Reuters report, petrol containing 22 per cent to 30 per cent ethanol will not attract excise duty. The exemption covers fuel variants such as E22, E25, E27 and E30, marking the first major fiscal incentive for ethanol blends above E20.
Sources in the Ministry of Petroleum & Natural Gas told NDTV that the rollout is subjected to extensive testing and consultation. "The move aligns with updated BIS standards... No decision on rollout of higher blends yet," the source added.
The decision comes as India steadily expands its biofuel programme to reduce dependence on imported crude oil and promote cleaner, domestically produced energy.
The latest tax exemption may appear technical, but it carries a broader message. For years, India's ethanol blending programme focused on achieving the E20 target. That goal is now within reach. The government's latest move suggests policymakers are already preparing the groundwork for what comes next.
The timing is notable.
Just weeks earlier, the Bureau of Indian Standards (BIS) formally notified fuel-quality standards for E22, E25, E27 and E30 petrol blends under IS 19850:2026. The standards, which came into effect on May 15, 2026, define everything from ethanol content and octane ratings to sulphur limits, testing procedures and safety requirements.
Together, the BIS notification and the excise-duty exemption create both the technical and financial framework needed for wider adoption of higher ethanol blends in the future.
India's Tryst With Ethanol
India's ethanol blending programme has progressed faster than initially planned.
The National Policy on Biofuels, introduced in 2018 and amended in 2022, advanced the target of achieving 20 per cent ethanol blending in petrol from 2030 to Ethanol Supply Year (ESY) 2025-26.
The results have been significant. Public sector oil marketing companies achieved 10 per cent blending in June 2022, five months ahead of schedule.
Blending levels then climbed steadily:
- 12.06% in ESY 2022-23
- 14.60% in ESY 2023-24
- 17.98% in ESY 2024-25 (up to February 28, 2025)
The rapid increase has helped reduce fossil fuel consumption while creating a larger domestic market for ethanol producers.
Why Ethanol Matters
India imports the majority of its crude oil requirements, making fuel imports one of the country's largest expenditure items. The government views ethanol as a strategic tool to tackle that challenge.
Speaking recently about the country's alternative-fuel roadmap, Union Road Transport and Highways Minister Nitin Gadkari highlighted the economic and environmental rationale behind the push.
"The Petroleum Minister has also said that 87 per cent of fossil fuel is imported. Our policy is import-substitute, cost-effective, pollution-free, and indigenous," Gadkari asserted. "The biggest thing is that pollution will be less because this is a green fuel. The money that goes abroad for fuel imports will remain in the country and benefit farmers, rural youth, labourers, tribal communities, and the agriculture sector."
In simple terms, every litre of ethanol blended into petrol potentially reduces crude imports while creating demand for domestically produced feedstock.
The Debate Over Higher Blends
India's ethanol rollout has not been without controversy. As E20 fuel became available nationwide, some vehicle owners raised concerns about compatibility, fuel efficiency and engine performance.
Those concerns eventually reached the Supreme Court. In September 2025, the top court dismissed a petition challenging the nationwide rollout of E20 fuel. During the proceedings, the government argued that the transition had been carefully evaluated and would also provide economic benefits to sugarcane farmers.
The government also rejected demands for a parallel supply of unblended petrol, maintaining that the transition was being implemented after due consideration.
Industry bodies later sought to address consumer concerns. The Society of Indian Automobile Manufacturers stated that while some older vehicles may experience a marginal reduction in mileage with E20 fuel, it does not pose a safety risk.
Gadkari has also repeatedly defended ethanol technology against criticism. The minister recently noted that flex-fuel motorcycles can run on both petrol and ethanol, offering consumers greater flexibility. He also dismissed concerns that ethanol is an inferior fuel, saying its performance characteristics are comparable to conventional fuels.
The Cost Question
One of the biggest consumer questions around ethanol-blended fuel has been pricing. Many motorists assume ethanol-blended petrol should cost less than conventional fuel.
However, government data has shown that ethanol is not necessarily cheaper. Last year, the petroleum ministry said the weighted average procurement cost of ethanol had become higher than the cost of refined petrol. As of July 31, 2025, the average procurement cost of ethanol for ESY 2024-25 stood at Rs 71.32 per litre, including transportation and GST.
That reality has complicated arguments for lower retail prices despite higher blending levels.
Enter E85
The excise-duty exemption arrives just days after India launched E85 fuel, one of the highest ethanol blends currently available in the country.
Unveiled by Petroleum and Natural Gas Minister Hardeep Singh Puri on World Environment Day (June 5) in New Delhi, E85 contains 85 per cent ethanol and is designed specifically for flex-fuel vehicles.
The rollout has begun through 48 public-sector fuel stations across the country. Importantly, the fuel is being offered at a discount.
According to Puri, state-run oil marketing companies will sell E85 at roughly Rs 20 per litre below the price of E20 fuel. For now, the fuel can only be used in vehicles equipped with flex-fuel engines. But its launch signals how quickly India's biofuel ecosystem is evolving.
(With inputs from agencies)
