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| An IOC pump |
What fuel do we use for a petrol engine?
The obvious answer is petrol. Well, the Indian government doesn't seem to think it should remain just petrol. India has progressively moved from lower ethanol blends to E20—petrol containing 20% ethanol. The word “20%” is of particular significance here.
Today, E20 petrol is being supplied across India, including to a large population of vehicles that were designed and certified under earlier fuel standards. At the same time, whatever economic benefit is expected from ethanol blending is not directly reflected in a lower price at the petrol pump.
So let's ask a few simple questions.
1. Did the government invest money in building new engines suitable for ethanol?
Not directly for consumers. Instead, the government supported the ethanol industry through various schemes, including interest subsidies for ethanol-production projects, while automobile manufacturers progressively developed E20-compatible vehicles.
But this raises another question: what about vehicles that were already on the road?
2. Did the government allow people to buy non-E20 petrol?
The answer is not a straightforward no.
Premium petrol products such as XP100 from IOC and Power100 from HPCL are available, and these products have higher octane ratings. However, they are considerably more expensive than ordinary petrol and are available only at selected fuel stations.
In Bengaluru, for example, prices of these premium fuels have been significantly higher than ordinary E20 petrol. So while alternatives may technically exist, they are not necessarily practical alternatives for an ordinary consumer who simply wants petrol without a 20% ethanol blend.
3. Did the government acknowledge the potential problems associated with moving from lower ethanol blends to E20?
The government maintains that E20 has undergone extensive testing and that E20-compliant vehicles can safely use the fuel.
However, there is an important distinction here. A vehicle being material-compatible with E20 is not necessarily the same as being fully optimized for E20 in terms of performance and fuel economy. The automobile industry itself had a phased roadmap for this transition.
That distinction matters because millions of older vehicles remain on Indian roads.
4. Did consumers get any benefit in terms of petrol prices from E20?
Not directly.
Brent crude is currently around $88–89 per barrel, while petrol in Bengaluru is around ₹111/litre. Brent crude previously reached around $147.50 per barrel in July 2008, while petrol in Bengaluru was around ₹57/litre around that period.
Of course, these two prices cannot be directly compared. Exchange rates, refining costs, taxes, dealer commissions and the pricing mechanism have all changed substantially.
But the comparison is still interesting. Despite the enormous increase in ethanol blending and changes in international crude prices, consumers continue to pay a substantial amount for petrol.
5. Did the government provide financial incentives to people who bought vehicles before the E20 transition to make them E20-compatible?
No comparable government-wide incentive was provided to consumers to retrofit older petrol vehicles for E20. Instead, the government's financial support was primarily directed towards expanding ethanol production capacity.
That creates an interesting imbalance: the industry received substantial policy and financial support to create the E20 supply ecosystem, while owners of older vehicles were largely left to deal with the transition themselves.
6. Did consumers suffer because of E20 petrol?
There are legitimate reasons for consumers to be concerned.
Ethanol contains less energy per litre than petrol. Therefore, when a vehicle designed around a lower ethanol blend runs on E20, fuel economy can be lower. Government and industry estimates generally put the reduction for some older vehicles in the low single digits, although claims of much larger mileage losses have also circulated. Even a 3–5% reduction is not insignificant for someone who drives every day.
More importantly, there are millions of older petrol vehicles still on Indian roads. Many were designed around lower ethanol blends and were not necessarily designed or optimized for E20.
The important point is not that every old vehicle will be damaged by E20. We don't have evidence to make such a blanket statement. The point is that the entire vehicle fleet was not created under the same fuel standard.
7. Does ethanol automatically mean green fuel?
No.
If ethanol is produced from sugarcane, there is another question we need to ask. Sugarcane is a water-intensive crop and requires fertilizers. So, in a water-stressed country, should we encourage the commercial use of a water-intensive crop for producing fuel?
Ethanol may have environmental advantages in some respects, but calling it simply a “green fuel” without considering the water, agricultural inputs and production process seems overly simplistic.
How did we get here?
Originally, India's national policy targeted 20% ethanol blending by 2030. The target was subsequently advanced, and E20 became the national blending standard from April 2026.
Now let's look at what happened from the vehicle-manufacturing side.
2001: Pilot programme for ethanol blending in India.
2003: India introduced the E5 (5% ethanol-blended petrol) programme in selected states.
November 2006: The E5 programme was extended to 20 states and four Union Territories. Oil companies were directed to sell 5% ethanol-blended petrol, subject to commercial viability.
November 2012: The government decided to implement 5% ethanol blending across the country.
January 2013: The government notified OMCs to sell petrol with ethanol up to 10% to achieve the 5% blending target.
June 2022: India achieved the 10% average ethanol-blending target, ahead of the original November 2022 target.
April 2023: E20 rollout began. The original target had been to complete the nationwide rollout by 2030. Automobile manufacturers started producing vehicles with E20-compatible materials and components, although these vehicles were not necessarily fully optimised for E20.
April 2025: Vehicles manufactured from April 1, 2025 became fully E20-compliant under the industry's transition roadmap, according to SIAM.
There is an important distinction here. SIAM has stated that vehicles manufactured from around 2008 were generally material-compatible with E10. For E20, the industry's roadmap provided for E20 material compatibility from April 2023 and E20-optimised vehicles from April 2025.
This leaves us with a large legacy fleet.
Vehicles manufactured between roughly 2008 and 2022 were generally designed around E10 compatibility, although 2008 should not be treated as a hard cutoff. And there are also vehicles manufactured before 2008 still running on Indian roads.
We therefore cannot simply assume that every petrol vehicle currently on Indian roads was designed with E20 in mind.
In its 2024 Biofuel Revolution document, SIAM explicitly acknowledged that most existing vehicles were E10-compatible and discussed the engineering challenges involved in converting the existing fleet to E20. It also highlighted the importance of E10 fuel availability during the transition.
By August 2025, however, SIAM was publicly presenting the ethanol programme as a successful collaborative initiative and highlighting the automobile industry's adaptation to the government's ethanol-blending targets.
So there is a legitimate question here: What happened to the earlier concern about the difficulty of converting the existing fleet?
Then came another development. On July 28, 2026, SIAM sent a letter to the government raising concerns about chloride and moisture contamination found in some E20 fuel samples. The concern was not simply that ethanol itself damages engines; it related to the quality and contamination of the fuel being supplied. The letter was subsequently withdrawn after SIAM said that the data required further validation. That episode does not prove that E20 itself is unsafe. But it does demonstrate that fuel quality and the transition to E20 deserve continued scrutiny.
So who should bear the cost?
I believe a petrol engine should be designed for the fuel standard applicable to it. If the government changes the fuel specification by introducing a higher ethanol blend, then vehicles designed for the earlier specification should not simply be expected to absorb all the consequences.
If older vehicles are not certified or optimized for E20, it should be the government's responsibility to ensure that suitable fuel remains available—or provide a reasonable mechanism for consumers to deal with the transition. After all, consumers bought their vehicles according to the fuel standards and policies applicable at the time. They should not be forced into a new fuel standard and then be expected to bear all the consequences of that policy change.
Consumers pay a lot to the government in terms of taxes here.
While buying vehicle (Karnataka)
Tax: 4-Wheelers
Below 5 Lakhs: 13% of vehicle cost
5 to 10 Lakhs: 14% of vehicle cost
10 to 20 Lakhs: 17% of vehicle cost
Above 20 Lakhs: 18% of vehicle cost
Tax: 2-Wheelers
Below 50,000: 10% of vehicle cost
50,000: 12% of vehicle cost
In addition to that, additional levies of 11% calculated directly on top of the base lifetime tax amount. Also if you are registering more than one 4-wheeler under same individual name in Karnataka then extra 2% surcharge.
Now coming to fuel, petrol is one of the highly taxed products in India. In Bengaluru, roughly ₹37–38 out of every ₹111 spent on a litre of petrol represents direct Central and Karnataka fuel taxes, although the exact amount varies with the applicable petrol price and tax calculation.
At the same time, banks have provided substantial loans to ethanol projects, and companies have invested heavily in ethanol production capacity based on government policy. The government has also provided significant interest subsidies to support this expansion.
That investment may still prove useful. The government has created a large and predictable market for ethanol, and the infrastructure built for the E20 program is not going away.
But there is a question that should not be ignored: Should the cost of creating this new ethanol ecosystem be borne, even partly, by people who bought petrol vehicles under the earlier fuel regime? That is the question I think deserves a serious answer.
Sajeev
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