India steps up energy shift as oil costs and tariff pressures mount
NEW DELHI, INDIA – JULY 10: Members of the Indian Youth Congress shout slogans during a protest against Union Minister Nitin Gadkari over the ethanol blended petrol issue at Raisina Road on July 10, 2026 in New Delhi, India. The Indian Youth Congress (IYC) on Friday staged a protest against the E20 ethanol blended petrol policy and accused the Center of implementing a measure that allegedly harms vehicles and benefits ethanol producers.
Hindustan Times | Hindustan Times | Getty Images
India, the world’s third-largest consumer of crude oil, is testing alternative fuels such as ethanol from corn and biogas from animal waste; because rising global oil prices and possible restrictions on Russia’s supply threaten the country’s energy security.
The South Asian country mandated blending 20% ethanol into oil five years ahead of schedule and plans to increase production of compressed biogas, a substitute for compressed natural gas and liquefied natural gas.
According to local media reports, the government is considering mixing 15% isobutanol in dieselIt successfully completed its first test last week. train powered by hydrogen cell.
Alternative fuels are becoming an increasingly important pillar of India’s energy security strategy, especially at a time when the country faces rising global energy prices and supply constraints, experts said.
With Russia supplying a significant portion of India’s oil and geopolitical pressures increasing, “diversification” [of energy] “It’s not optional anymore,” Omdia senior automotive analyst Diwakar Murugan told CNBC.
He added that given the government’s push for energy diversification, automakers in India are “hedging their bets” on compressed natural gas, hybrids, flexible-fuel platforms and hydrogen for commercial vehicles.
Oil is up more than 25% so far this month as hostilities between the US and Iran flare, and energy intelligence firm Kpler has warned that prices could rise above $100 a barrel if both the Red Sea and the Strait of Hormuz are closed.
Russian oil accounted for more than 50% of India’s crude imports in June, displacing supplies from the Middle East to the South Asian country, data from Kpler showed.
In the first 15 days of this month, India bought 2.6 million barrels of Russian oil every day, representing more than 50% of its crude imports, Kpler chief research analyst Sumit Ritolia told CNBC. But this dependence on Moscow makes India a target for Washington’s new sanctions, which call for 100% tariffs on buyers of Russian oil unless peace is reached with Ukraine by September.
High oil prices have already weakened India’s public finances and pushed consumer inflation above 4%, a 27-month high. India meets about 88.5% Since crude oil needs can be met through imports, any alternative fuel that can meet this demand, even partially, will provide relief to the economy.
Ethanol for energy security
“Ethanol blending has emerged as one of India’s most effective crude oil replacement strategies,” Pankaj Srivastava, Rystad Energy’s senior vice president of commodity markets-oil, told CNBC.
He said “each incremental increase in blending” reduces gasoline imports, reduces dependence on crude oil and saves “significant amounts of foreign exchange” while supporting domestic agriculture and rural incomes.
Srivastava said that the requirement to blend 20% ethanol into gasoline is estimated to save about $4 billion annually by 2030, or $6.4 billion in a high price scenario.
According to the government, the ethanol blending plan, which began in 2014, resulted in foreign currency. Foreign exchange savings of 1.97 trillion rupees ($20 billion) and replaced 31.6 million metric tons of crude oil.
While India has additional ethanol capacity to take the blending percentage even higher to 25%, the government put the plans on hold as the earlier mandate faced public backlash. Vehicle owners expressed concerns that blended fuel would damage their vehicles and reduce mileage.
While several lawmakers raised the issue of the impact of ethanol blending on vehicles on Monday, the government has repeatedly denied claims of any adverse effects.
Omdia’s Murugan said automobile companies in India will start producing vehicles compatible with E20 (20% ethanol blended gasoline) after 2023, but owners of cars produced before 2023 “will face double the cost”.
Older vehicles not designed or calibrated for E20 fuel may experience reduced fuel economy, compatibility issues with certain components and higher maintenance requirements, experts said.
Auto companies have denied reports of widespread damage to vehicles due to ethanol. But last week, a consumer court ordered the country’s largest automaker Maruti Suzuki to replace a car. Consumer claiming damage According to a Reuters report, it is due to E20 fuel.
