India’s ambitious push for 27% ethanol blending: A step toward energy security or a risky bet?

India’s quest for energy security and a greener future has taken a decisive leap forward with the government’s proposal to introduce 27 per cent ethanol blending in petrol (E27). This policy is projected as a stepping stone toward the target of 30 per cent blending by 2030. The announcement builds upon the remarkable success of the Ethanol Blended Petrol (EBP) programme, which has consistently outperformed its targets. From less than two per cent blending a decade ago, the country reached 10 per cent blending (E10) by 2022 and is on track to achieve 20 per cent blending (E20) by 2025, five years ahead of schedule.

At one level, this is a story of strategic foresight and effective policy execution. Yet, the transition from E20 to E27 is not just a technical upgrade. It represents a critical test of India’s ability to balance energy security, environmental responsibility, and food sustainability in a landscape where climate change, resource pressures, and consumer affordability converge.

Ethanol’s appeal

India is the world’s third-largest consumer of oil and imports around 88 per cent of its crude requirement, spending over $120 billion annually. This dependence leaves the economy vulnerable to volatile global prices and geopolitical shocks, as seen during the oil price surges following the Russia-Ukraine conflict. The EBP programme, launched in 2003, was designed to reduce this vulnerability by blending domestically produced ethanol into petrol. In doing so, it substitutes crude imports, conserves foreign exchange, and reduces carbon emissions.

The progress has been swift. In 2014, blending levels stood at barely 1.53 per cent. By 2022, India had reached 10 per cent, and the country is now poised to touch 20 per cent by 2025. According to the Union Ministry of Petroleum and Natural Gas, the E20 programme is projected to save nearly Rs 30,000 crore annually in foreign exchange, replace almost six million tonnes of crude oil, and cut carbon dioxide emissions by about 10 million tonnes each year. These figures provide a compelling case for pushing blending levels further. To this end, the Bureau of Indian Standards has initiated work on E27 norms, while the Automotive Research Association of India is studying how engines and vehicles can adapt to higher ethanol blends.

Ethanol blending is not just about energy security. Its environmental promise is equally compelling. Research has shown that ethanol blends can reduce carbon monoxide emissions by up to half in two-wheelers and by nearly a third in four-wheelers, while hydrocarbon emissions also fall significantly. If these reductions scale up with higher blends, ethanol could emerge as a critical tool in helping India meet its National Green Mobility Strategy and its long-term Net Zero 2070 commitment.

For India’s farmers, ethanol has opened new opportunities. Over the past decade, the EBP programme has channelled more than Rs 1.2 lakh crore to farmers and close to Rs 2 lakh crore to distilleries. By creating steady demand for sugarcane, maize, and surplus grains, the policy has reduced price volatility in agricultural markets and boosted rural incomes. The government has been particularly keen on diversifying ethanol feedstocks beyond sugarcane, encouraging grain-based production in states such as Bihar and Karnataka. In addition, the PM-JI-VAN Yojana is promoting second-generation ethanol from agricultural residues, linking ethanol expansion with waste-to-energy goals and providing potential solutions to problems like stubble burning in northern India.

Risks beneath the promise

For all its advantages, the expansion to E27 raises serious challenges that cannot be ignored. One of the foremost concerns is food security. India has already begun to see a strain on maize supplies due to rising ethanol demand. In 2023, the country faced a five-million-tonne shortfall in maize, forcing imports for the first time in years. This disrupted supply for the poultry and starch industries and contributed to food inflation. If the ethanol programme continues to depend predominantly on food crops, the balance between fuel and food could become a source of economic and political tension.

Water use is another significant challenge. Sugarcane, the dominant ethanol feedstock, requires vast quantities of water, often 1,500 to 2,000 litres per kilogram of sugar. In states such as Maharashtra and Uttar Pradesh, aquifers are already under pressure and rainfall variability is intensifying with climate change. Expanding sugarcane acreage to feed ethanol demand risks worsening groundwater depletion in regions that are already water-stressed. The environmental gains from reducing vehicular emissions could thus be undermined by ecological costs borne by rural communities.

Technological and consumer-side issues complicate the picture further. Vehicles running on higher ethanol blends typically see a six to seven per cent reduction in fuel efficiency unless specifically designed for such fuels. This poses a challenge in India’s highly price-sensitive automobile market. Flex Fuel Vehicles, capable of running on higher blends, are being piloted by companies such as Toyota and Maruti Suzuki, but their costs are expected to be higher than conventional vehicles. Retrofitting existing vehicles for E27 compliance is complex and expensive, and without subsidies or incentives, consumer acceptance may remain low.

On the supply side, scaling ethanol production capacity to meet E27 targets is formidable. India produced about 700 crore (seven billion) litres of ethanol in 2023, but projections suggest that more than 1,200 crore (12 billion) litres will be needed by 2030. While capacity has expanded rapidly in recent years, much of it is tied to financially stressed sugar mills, which face difficulty in accessing credit. Banks remain hesitant to finance new distilleries, and investment in grain-based or second-generation ethanol plants is still limited. At the same time, retail distribution infrastructure must be upgraded to dispense E27 fuel nationwide, requiring substantial investment in pumps, tanks, and logistics.

Balancing ambition with pragmatism

India’s ethanol story demonstrates how coordinated policy, industry participation, and farmer engagement can deliver quick results. Yet, the E27 target cannot be achieved by enthusiasm alone. It requires a recalibration of strategy to balance ambition with realism. A central task is diversifying feedstocks. Without rapid progress in second-generation ethanol production from crop residues, forestry waste, and municipal solid waste, the risks to food security will only grow. The PM-JI-VAN Yojana, while well-conceived, has been slow to scale up. Greater public investment, coupled with private sector partnerships, will be essential to make non-food ethanol commercially viable.

At the same time, policies to ease consumer adoption must be strengthened. Incentives for Flex Fuel Vehicles, subsidies for retrofitting existing engines, and awareness campaigns to encourage vehicle owners to embrace ethanol blends can smooth the transition. Without consumer confidence, the programme risks stalling despite production gains. Infrastructure investment will be another critical determinant. Unless storage, transport, and dispensing networks expand alongside production, the supply chain could face serious bottlenecks.

Perhaps the most important strategic insight is that ethanol must complement, rather than compete with, other clean energy transitions. Electric mobility and green hydrogen represent long-term solutions for decarbonisation, though they face scalability challenges in the short run. Ethanol offers a bridge solution, harnessing India’s agricultural strengths while more transformative technologies mature. But over-reliance on ethanol could divert resources and attention away from EVs and hydrogen, potentially delaying broader sustainability goals. A balanced approach that integrates ethanol blending into a wider energy transition is imperative.

A leap with guardrails

India’s push toward E27 represents a bold step at the intersection of energy security, environmental goals, and rural development. It has the potential to reduce the oil import bill, provide cleaner fuels, and improve farmer incomes. But these gains will only be realised if the programme is pursued with caution, foresight, and an openness to recalibration. Food security, water stress, vehicle compatibility, and infrastructure constraints must be addressed through robust policy support, financial innovation, and public-private collaboration.

Handled wisely, E27 could position India as a global leader in biofuel adoption and mark a critical milestone on the path to a cleaner, more self-reliant future. But if ambition outpaces pragmatism, the risks of ecological damage, food inflation, and consumer resistance may overshadow the gains. The challenge is to ensure that India’s ethanol revolution remains a story of sustainable innovation, not a cautionary tale of misplaced priorities.

Amal Chandra is an author, policy analyst and columnist

Views expressed are the author’s own and don’t necessarily reflect those of Down To Earth