What lies beyond India’s E20 push

Why in the News

India has scaled up the E20 petrol blend this year as crude prices rose following the closure of the Strait of Hormuz. A written reply to the Lok Sabha by the Road Transport and Highways Minister has conceded that E20 reduces fuel economy by “2% to 6% depending on vehicle category and vintage”, citing a joint study by the Automotive Research Association of India, the Society of Indian Automobile Manufacturers and Indian Oil Corporation Limited. The blend was introduced in 2023 on three stated claims: savings for the consumer, lower carbon emissions, and foreign exchange savings. All three rest on mileage holding steady, and the admitted loss in mileage puts each of them in question.

What is the E20 blend?

1. Composition: A litre of E20 petrol is 80% motor gasoline and 20% anhydrous ethanol (ethanol with water removed, so it mixes with petrol without separating).
2. Rollout: Public sector oil marketing companies began selling E20 at select outlets in February 2023, and supply has since widened across the country.
3. Energy content: Ethanol releases less energy per litre burnt than pure gasoline, so a litre of E20 carries a vehicle a shorter distance than a litre of the earlier E10 blend.

Why has E20 been pushed now, and on what claims?

1. Crude price trigger: The scale up followed rising crude prices after American action against Iran and the closure of the Strait of Hormuz in response.
2. Three stated benefits: The case for the blend rests on cheaper fuel for households, lower carbon emissions per kilometre, and a smaller oil import bill.
3. The admitted qualifier: The government’s own position records a fuel economy loss of 2% to 6%, varying with vehicle category and vintage.
4. Engine damage is unquantified: Owners of vehicles of 2022 vintage and earlier report mileage loss beyond 6% along with damage to engines and fuel tanks, and the scale of that damage cannot be measured from available data.

Has E20 saved Indian households money?

1. The savings claim: A higher ethanol share substitutes a cheaper input for expensive crude, which is argued to lower the household fuel bill and hold inflation down.
2. What the claim omits: The claim prices the input and ignores the distance travelled per litre, which is what a household actually pays for.
3. The arithmetic at the pump: E20 was introduced while keeping the pump price unchanged from E10. A car averaging 15 km per litre on E10 with a 6% mileage loss needs 1.06 litres for the same 15 km, so Rs 106 buys what Rs 100 previously covered.
4. The aggregate burden: An investigation by The Reporters Collective estimates that Indian consumers spent an additional Rs 88,234 crore over three years because of the mileage loss, with the burden rising every year.
5. Alternative price instruments exist: Holding pump prices down when crude rises can be done through indirect tax policy in the short run, without shifting the cost onto mileage.

Do carbon emissions actually fall with E20?

1. Lower carbon per litre: E20 embodies less carbon per litre than E10, at 2.23 kgCO2 per litre against 2.32 kgCO2 per litre, drawn from United States Environmental Protection Agency figures.
2. Mileage cancels the gain: More litres burnt for the same distance offsets the lower carbon content of each litre.
3. The break even point is 4%: Emissions fall only where the mileage loss is under 4%. Across the 4% to 6% range the Minister himself stated, emissions rise rather than fall.
4. The excess at 6%: A 6% mileage loss produces 2.37 kgCO2 against 2.32 kgCO2 for 15 km travelled, an excess of about 50 gCO2.
5. The fleet mix decides the average: Newer vehicles built for E20 lose less mileage and emit less, older vehicles emit more, so emissions per kilometre across the country depend on the weight of each vintage on the road.

What does ethanol blending do to foreign exchange and to crops?

1. The forex logic: Oil is a large share of the import bill, so any substitution away from crude does save foreign exchange.
2. Mileage offsets part of it: A fall in mileage raises the volume of fuel consumed, which cancels part of the import saving.
3. Feedstock is diverted from food: Sugarcane and maize are the two main sources of ethanol, so blending targets translate into crop diversion and into a long term adjustment in what is grown.
4. The sugar consequence: Exports were banned in 2023 and again this year as ethanol diversion pushed up domestic demand, cutting dollar earnings from sugar exports.
5. The maize consequence: Maize export earnings fell sharply over the last two years as its share in ethanol production rose, and India became a net importer of maize last year.
6. The trade channel closes the loop: A demand and production mismatch in an agricultural commodity is settled through higher prices, through trade management, or both. Lower exports and higher imports are themselves a loss of foreign exchange.

Challenges to the E20 blend

1. Legacy fleet incompatibility: Vehicles built before E20 compatibility norms carry the sharpest mileage loss and face corrosion risk in fuel lines and seals. Eg. Cars and motorcycles of 2022 vintage and earlier run on the same blend with no alternative offered at the pump.
   The Fix: Keep E10 available at fuel outlets so owners of older vehicles can buy the blend their engine was built for.
2. Feedstock concentration: Ethanol supply rests on two water and land intensive crops, so a blending target transmits directly into cropping choices. Eg. Sugarcane in Maharashtra draws heavily on irrigation in water stressed districts.
   The Fix: Scale second generation ethanol from crop residue and other non food feedstock so blending stops competing with the food chain.
3. Absence of consumer choice: A single blend at the pump removes the buyer’s ability to weigh a mileage loss against a price. Eg. The Chief Economic Adviser has argued that consumers should at least be given a choice between E10 and E20.
   The Fix: Require outlets above a set throughput to dispense both blends.
4. Unused fiscal instrument: Excise duty on petrol can absorb a crude price spike, which is the task the blend has instead been asked to perform. Eg. Central duty relief was used to hold pump prices down until recent State elections were over.
   The Fix: Set a rule based countercyclical excise band so duty falls automatically once crude crosses a stated threshold.
5. Transport demand left untouched: Blending changes what a vehicle burns and not how many vehicle kilometres are travelled, so total fuel use and pollution keep rising. Eg. Vehicle registrations in large Indian cities continue to grow faster than public transport capacity.
   The Fix: Build reliable subsidised public transport with last mile connectivity, alongside cycling and walking infrastructure.

Conclusion

The blend is settled policy and the fleet running on it is not. Two questions remain open. The first is whether a household gets to choose the blend its engine was designed for, rather than absorbing the mileage loss silently at an unchanged pump price. The second is whether ethanol demand can be met without pulling sugarcane and maize out of the food and export chain. Watch the feedstock mix reported for the next Ethanol Supply Year (the twelve month period over which ethanol supply contracts to oil marketing companies are counted) and whether E10 stays on sale.

Back2Basics

1. Ethanol Blended Petrol Programme: Administered by the Ministry of Petroleum and Natural Gas, it requires oil marketing companies to sell petrol blended with ethanol to cut crude imports and support sugar and grain producers.
2. National Policy on Biofuels, 2018: It set the blending pathway and was amended in 2022 to advance the 20% ethanol blending target to the Ethanol Supply Year 2025-26 from 2030.
3. Permitted feedstock: The policy widened eligible raw material beyond sugarcane molasses to sugarcane juice, damaged foodgrain, surplus rice and maize.
4. Second generation ethanol: Produced from crop residue and other lignocellulosic waste rather than from food crops, it is supported through the Pradhan Mantri JI-VAN Yojana.

Matching Previous Year Question

“Consider the following statements: Statement I: Of the two major ethanol producers in the world, i.e., Brazil and the United States of America, the former produces more ethanol than the latter. Statement II: Unlike in the United States of America, where corn is the principal feedstock for ethanol production, sugarcane is the principal feedstock for ethanol production in Brazil. Which one of the following is correct in respect of the above statements?”