The central government has extended excise duty exemptions to petrol blended with higher levels of ethanol, providing tax support beyond the current E20 fuel standard.
According to a government notification, petrol containing 22% to 30% ethanol will be exempt from excise duty. The exemption applies to fuel variants including E22, E25, E27, and E30. This marks the first significant fiscal incentive for ethanol blends above E20.
The move comes as India continues to expand its biofuel programme aimed at reducing dependence on crude oil imports and increasing the use of domestically produced alternative fuels.
New Standards for Higher Ethanol Blends
The excise-duty exemption follows the recent notification of fuel-quality standards for E22, E25, E27, and E30 petrol blends by the Bureau of Indian Standards (BIS).
Under IS 19850:2026, which came into effect on May 15, 2026, the standards specify ethanol content, octane requirements, sulphur limits, testing procedures, and safety parameters for these fuel variants.
The new standards and tax exemption together establish the regulatory and fiscal framework for the potential expansion of higher ethanol blends in India.
Ethanol Blending Programme Progress
India's ethanol blending initiative has advanced significantly in recent years under the National Policy on Biofuels.
The policy, introduced in 2018 and amended in 2022, advanced the target of achieving 20% ethanol blending in petrol from 2030 to Ethanol Supply Year (ESY) 2025-26.
Public sector oil marketing companies achieved 10% ethanol blending in June 2022, ahead of schedule. Blending levels have continued to rise:
- 12.06% in ESY 2022-23
- 14.60% in ESY 2023-24
- 17.98% in ESY 2024-25 (up to February 28, 2025)
Focus on Reducing Fuel Imports
India imports a large share of its crude oil requirements. Ethanol blending is part of the government's broader strategy to reduce import dependence and promote domestic fuel production.
According to government statements, increased ethanol usage can help lower fossil fuel consumption while creating additional demand for agricultural feedstock used in ethanol production.
Discussions Around Higher Ethanol Blends
The rollout of E20 fuel prompted discussions regarding vehicle compatibility, fuel efficiency, and engine performance.
In September 2025, the Supreme Court dismissed a petition challenging the nationwide rollout of E20 fuel. During the proceedings, the government stated that the transition had been evaluated and could also benefit sugarcane farmers through increased ethanol demand.
The government also maintained its position against introducing a parallel nationwide supply of unblended petrol.
Industry bodies, including the Society of Indian Automobile Manufacturers (SIAM), have stated that while some older vehicles may experience a slight reduction in mileage with E20 fuel, the blend does not pose safety concerns.
Pricing Remains a Key Consideration
One of the key questions surrounding ethanol-blended fuel has been its cost relative to conventional petrol.
According to petroleum ministry data, the weighted average procurement cost of ethanol has, at times, exceeded the cost of refined petrol. As of July 31, 2025, the average procurement cost of ethanol for ESY 2024-25 was reported at ₹71.32 per litre, including transportation and GST.
This has influenced discussions regarding the pricing of higher ethanol-blended fuels.
India Launches E85 Fuel
The excise-duty exemption comes shortly after the launch of E85 fuel in India.
Introduced on June 5, 2026, by Union Petroleum and Natural Gas Minister Hardeep Singh Puri, E85 contains 85% ethanol and is designed for flex-fuel vehicles.
The fuel has initially been introduced through 48 public-sector fuel stations across the country. According to the government, E85 is being offered at approximately ₹20 per litre lower than E20 fuel. However, it can only be used in vehicles designed or approved for flex-fuel operation.
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