E20 petrol can be costlier to produce than pure petrol when international crude oil trades at around $70 a barrel, the Ministry of Petroleum and Natural Gas has said, challenging the assumption that blending ethanol should automatically make fuel cheaper.
The government currently procures maize-based ethanol at around ₹71.86 a litre. This price excludes goods and services tax, transportation, storage and handling charges, the ministry said in a question-and-answer note on India’s ethanol-blending programme.
“Therefore, if international crude oil is trading at around US$70 per barrel, E20 is actually costlier to produce than pure petrol,” the ministry said.
E20 contains 20% ethanol and 80% petrol. Since the ethanol component is bought at a fixed remunerative price intended to support domestic producers and farmers, its cost does not move directly with international crude prices.
The economy would change if crude oil prices rose sharply, the ministry said. At crude prices of around $120-130 a barrel, ethanol would become cheaper than petrol produced from imported oil.
The government said the ethanol-blending programme should therefore not be viewed only as a way to reduce fuel prices on a particular day. Its wider purpose is to reduce India’s dependence on imported crude and provide some protection against global oil-price volatility.
“Ethanol blending is therefore not about making petrol cheaper on a particular day. It is about reducing India’s exposure to imported crude oil,” the ministry said.
Domestic Component Provides Price Buffer
The ministry argued that nearly one-fifth of petrol sold in India now comes from domestically produced ethanol. Unlike crude oil, the procurement price of this portion does not change daily because of geopolitical tensions, shipping disruptions or movements in global benchmark prices.
The procurement price varies depending on the feedstock used to produce ethanol. The government’s release listed provisional FY26 prices of ₹57.97 a litre for ethanol produced from C-heavy molasses, ₹60.73 a litre for B-heavy molasses and ₹71.86 a litre for maize-based ethanol, among other sources.
The actual cost of E20 at the refinery or fuel outlet would also depend on the mix of ethanol feedstocks, taxes, transportation, storage, dealer margins and the cost of the petrol component.
The release did not provide a complete city-wise comparison of E20 production costs and retail petrol prices.
Energy Security Over Immediate Savings
The ministry said the programme had reduced the country’s foreign-exchange outflow and supported farm incomes.
Since the 2014-15 ethanol supply year, the blending programme has saved more than ₹1.97 lakh crore in foreign exchange and replaced nearly 316 lakh tonnes of crude oil, according to government estimates.
It has also transferred more than ₹1.66 lakh crore to farmers through ethanol procurement, the ministry said.
The government’s position is that these wider benefits—lower crude imports, greater energy security, support for farmers and reduced exposure to volatile global oil prices—should be considered alongside the cost of producing E20.
The ministry’s statement is a government assessment of the programme. It does not establish that E20 is always more expensive than pure petrol, as the comparison changes with crude prices, ethanol feedstocks, taxes and logistics costs.