India, the world's third-largest oil importer and consumer, has waived excise duty on blended petrol to promote ethanol adoption. The exemption covers E22, E25, E27, and E30 fuel blends, which contain varying proportions of motor spirit and ethanol. According to the finance ministry's notification, these blends consist of 78%, 75%, 73%, and 70% motor spirit mixed with 22%, 25%, 27%, and 30% ethanol by volume, respectively.
Government's Ethanol Push
This move is part of the government's broader strategy to expand ethanol usage. Plans include opening 50 to 100 ethanol fuel stations in Delhi-NCR, Pune, Mumbai, and Nagpur, with a target to scale up the network to 500 stations by the end of 2026. The initiative aims to reduce dependence on imported crude oil and support the domestic ethanol industry.
Impact of Rising Fuel Prices
The decision comes as petrol and diesel prices in India have increased by over Rs 7.5 per litre since the onset of the Middle East crisis, following nearly four years of stable prices. Minister Puri earlier stated that state-run oil marketing companies are preparing to offer E85 fuel at a discount of Rs 20 per litre compared with E20 petrol. This discount compensates for the lower energy content of ethanol, which has about one-third less energy than petrol. E85 is a blend comprising 85% ethanol and 15% petrol. Meanwhile, E20 petrol, containing 20% ethanol and 80% petrol, will continue to be available at all fuel stations, as most vehicles in India are compatible with ethanol blends of up to 20%.
Global Energy Stress
Energy supplies worldwide are under strain due to the ongoing Middle East conflict. The war, which began on February 28 after joint US and Israel strikes on Iran, has intensified despite ongoing peace efforts. Global crude oil prices have climbed from around $70 per barrel to over $100, causing significant under-recoveries for oil marketing companies. Despite a cumulative retail price increase of over Rs 7.5 per litre, these firms are still losing approximately Rs 12 per litre on petrol and Rs 21 per litre on diesel.
The excise duty waiver on blended petrol is expected to encourage the use of ethanol-blended fuels, reducing the country's reliance on imported oil and mitigating the impact of global price fluctuations on domestic consumers.
