Centre Waives Excise Duty on E22–E30 Ethanol-Blended Petrol, Signals Next Phase of Biofuel Push

India has removed excise duty on petrol blended with higher levels of ethanol, marking a significant step in the country's biofuel expansion strategy. The exemption applies to petrol containing 22 percent to 30 percent ethanol, covering fuel grades such as E22, E25, E27 and E30. While no decision has yet been taken on a nationwide rollout of these higher blends, the move provides a fiscal incentive that could support their future introduction.

As per reports, the decision follows the notification of new fuel-quality standards by the Bureau of Indian Standards (BIS) for E22, E25, E27 and E30 petrol under IS 19850:2026, which came into effect on May 15, 2026. The standards specify ethanol content, octane ratings, sulphur limits, testing procedures and safety requirements. Together, the BIS norms and the excise-duty exemption establish the technical and financial groundwork for wider adoption of higher ethanol blends.

The latest policy move signals that the government is preparing for the next phase of India's ethanol-blending programme. Until now, the focus has been on achieving the E20 target, a goal that is now close to being realised. The exemption suggests policymakers are already looking beyond E20 as part of the country's long-term energy transition strategy.

India's ethanol programme has expanded rapidly since the launch of the National Policy on Biofuels in 2018, which was later amended in 2022. The policy advanced the target of achieving 20 percent ethanol blending in petrol from 2030 to Ethanol Supply Year (ESY) 2025-26. Public sector oil marketing companies achieved 10 percent blending in June 2022, five months ahead of schedule. Ethanol blending subsequently rose to 12.06 percent in ESY 2022-23, 14.60 percent in ESY 2023-24 and 17.98 percent in ESY 2024-25 up to February 28, 2025.

The government views ethanol as a strategic solution for reducing India's dependence on imported crude oil, which accounts for the majority of the country's fuel requirements. By increasing the use of domestically produced biofuels, policymakers aim to lower import bills, improve energy security and create additional income opportunities for farmers and rural communities through increased demand for agricultural feedstocks used in ethanol production.

Despite the policy push, higher ethanol blends have generated debate among vehicle owners. Concerns have been raised over fuel efficiency, engine compatibility and vehicle performance, particularly for older models. In September 2025, the Supreme Court dismissed a petition challenging the nationwide rollout of E20 fuel after the government argued that the transition had been carefully evaluated and would provide economic benefits to sugarcane farmers. The government also rejected demands for a parallel supply of unblended petrol.

Industry groups have sought to address consumer concerns, stating that while some older vehicles may experience a marginal reduction in mileage with E20 fuel, there are no significant safety issues. The government has also promoted flex-fuel vehicles capable of operating on both petrol and ethanol blends, arguing that the technology offers consumers greater fuel flexibility while supporting environmental goals.

Questions over fuel pricing have also emerged as ethanol blending increases. While many consumers assume ethanol-blended fuel should be cheaper, ethanol procurement costs have risen in recent years. Government data showed that the weighted average procurement cost of ethanol for ESY 2024-25 stood at INR 71.32 per litre, including transportation and GST, making it more expensive than refined petrol in some cases. This has complicated expectations that higher ethanol blending would automatically translate into lower retail fuel prices.

The excise-duty exemption comes shortly after the launch of E85 fuel in India. Petroleum and Natural Gas Minister Hardeep Singh Puri introduced the fuel on World Environment Day, June 5, 2026. E85 contains 85 percent ethanol and is intended for use in flex-fuel vehicles. The fuel has initially been made available at 48 retail outlets operated by public sector oil marketing companies and is being sold at a discount of about INR 20 per litre compared with E20 petrol. The launch of E85 marks another step in India's efforts to expand the use of higher ethanol blends in the transport sector.

Commenting on the development, Vasudha Madhavan, Founder and CEO, Ostara Advisors, said, "The government's decision to waive excise duty on E22, E25, E27 and E30 fuel blends is a positive step toward accelerating India's clean energy transition and strengthening energy security. By incentivising the adoption of higher ethanol blends, this move can help reduce dependence on imported crude oil, lower carbon emissions, and create stronger demand for domestically produced biofuels. It also sends a clear policy signal that supports long-term investments across the ethanol value chain, benefiting producers, farmers, and fuel retailers alike. To fully realise the benefits of higher ethanol blends, it will be important to accelerate the adoption of flex-fuel vehicles and expand supporting fueling infrastructure across the country."

Further, Deepak Ballani, Director General, ISMA, added, "The removal of excise duty on higher ethanol blends is a welcome and progressive step that strengthens the Government’s push towards accelerated ethanol blending. Alongside initiatives such as the rollout of E85 and flex-fuel vehicles, this measure reduces the tax burden relative to petrol and creates a more enabling ecosystem for higher blend adoption. India is already well-prepared on the supply side, with ethanol capacity exceeding demand by nearly 600 crore litres, including around 900 crore litres from the sugar industry. Advancing to E22 and E25 could unlock an additional 120 crore litres and 300 crore litres of demand, respectively, significantly benefiting the sector.

"Going forward, scaling up ethanol consumption will depend on faster adoption of flex-fuel vehicles by OEMs, supported by regulatory initiatives such as BIS certification and ARAI validation of higher blends. If half of India’s vehicle fleet becomes flex-fuel compatible by 2030, it could unlock an additional 400 crore litres of demand. At the same time, aligning ethanol procurement prices with the nearly 20 percent increase in sugarcane FRP is critical to ensure industry viability, support timely farmer payments, and sustain the momentum of India’s ethanol blending programme," Ballani noted.