The Indian government has issued a notification removing excise duty on higher blends of ethanol, a move that industry body ISMA (Indian Sugar & Bio-Energy Manufacturers Association) has described as a significant step forward for the country's ethanol blending programme.
The Indian Sugar & Bio-Energy Manufacturers Association said the decision reduces the tax burden on blended fuels relative to petrol, creating what it called a "more enabling ecosystem" for the adoption of higher ethanol blends such as E22 and E25.
"The removal of excise duty on higher ethanol blends is a welcome and progressive step that strengthens the Government's push towards accelerated ethanol blending," said Deepak Ballani, Director General of ISMA.
Supply Capacity Outpaces Demand
According to ISMA, India's ethanol production capacity already exceeds current demand by nearly 600 crore litres, with the sugar industry alone contributing around 900 crore litres of capacity. The association indicated that a transition to E22 blends could generate an additional 120 crore litres of demand, while a move to E25 could unlock as much as 300 crore litres.
The policy change aligns with broader government initiatives, including the rollout of E85 fuel and the promotion of flex-fuel vehicles, which are capable of running on varying proportions of ethanol and petrol.
Flex-Fuel Vehicles Key to Scaling Up
ISMA noted that realising the full potential of higher ethanol blending will depend on original equipment manufacturers (OEMs) accelerating their production of flex-fuel vehicles. The association pointed to regulatory steps such as BIS certification and ARAI validation of higher blends as necessary enablers.
The industry body projected that if half of India's vehicle fleet transitions to flex-fuel compatibility by 2030, an additional 400 crore litres of annual ethanol demand could be unlocked.
Pricing Alignment Remains a Concern
While welcoming the excise duty removal, ISMA also highlighted the need to align ethanol procurement prices with the approximately 20 percent increase in sugarcane Fair and Remunerative Price (FRP). The association stated that such alignment is critical to maintaining industry viability, ensuring timely payments to farmers, and sustaining the momentum of India's ethanol blending programme.
The government has not yet made a separate announcement on procurement price revisions.