Ethanol should be a cheaper fuel. So why isn’t E20 priced lower than pure petrol? Here’s what the government says
Minister of State for Petroleum and Natural Gas Suresh Gopi, in a written reply to an unfiled question in the Rajya Sabha on Monday, said the country’s ethanol production capacity has reached around 2,000 crore liters per year and is being developed keeping future requirements in mind.
“The ethanol production capacity created in the country is planned not only to meet the current E20 blending requirement but also to meet future growth in oil demand, provide operational flexibility during seasonal changes in feedstock availability and support higher ethanol blends, flexible fuel vehicles and other emerging biofuel applications as approved by the Government,” the Minister said. he said.
Amid government pushes for higher ethanol blending, one of the biggest questions critics are asking is why E20 gasoline isn’t cheaper than pure gasoline.
In the press release published earlier this monthThe government has clarified that ethanol is not necessarily a lower cost fuel under current market conditions.
“The government is ensuring that farmers get a fair price for ethanol supplied under the scheme. For example, corn-based ethanol is available at around Rs 71.86 per litre, even before adding GST, transportation and storage costs. With global crude oil prices around US$ 70 per barrel, E20 production can cost as much as pure oil, or even more. Ethanol becomes cheaper only when crude oil prices rise sharply, typically to US$ 120 to 130.” per barrel or higher becomes an option,” the government said.
The government added that even if E20 was priced similarly to pure petrol, consumers would still benefit. “About 20 per cent of every liter of gasoline sold in India is now domestically produced ethanol. Unlike crude oil, ethanol prices are not affected by fluctuations in Brent crude, wars or global shipping disruptions. This means one-fifth of every fuel tank is sourced from a stable domestic supply, helping reduce India’s exposure to global oil price shocks while strengthening its energy security.”
The government also rejected the perception that India’s transition to E20 was happening too quickly, describing it as “not a sudden leap but a calibrated progress”.
“In 2021, India required approximately 500 to 600 billion liters of ethanol annually to achieve 10 per cent blending. As new investments expanded production capacity, annual ethanol availability approached 1,200 billion litres. Once sufficient supply was available, increasing blending to 20 per cent became a logical and responsible next step,” the statement said. he said.
Answering questions about why consumers at gas stations cannot choose between pure gasoline, E10 and E20, the government said that offering more than one base fuel across the country would significantly increase costs and create logistical difficulties.
“India operates at one lakh retail outlets through a vast network of refineries, terminals and pipelines. Stocking three separate base fuels across the country will increase costs and complicate quality control at each outlet. Premium gasoline is not a fair comparison. It is not a separate base fuel across the country but a small, additively enhanced product sold in limited quantities at a premium price,” the statement said.
The government also noted the investments already made in the ethanol ecosystem.
“Public sector banks have provided financing of close to Rs 1 lakh crore in ethanol plants, warehousing and logistics. Going back to E10 now would cripple that investment and hurt the farmers and entrepreneurs who built it in good faith,” he added.
Amid concerns about fuel efficiency, the government has acknowledged that some vehicles may experience a 3% to 5% reduction in fuel economy with E20. However, real-world mileage depends on factors such as driving habits, tire pressure, vehicle maintenance and air conditioning use rather than just fuel type.
Citing examples from Brazil and Japan, as well as the United States, where E10 is standard and E15 has been expanded, the government said ethanol blending has become a globally accepted practice.
