India Scraps Excise Duty On Petrol With 22% to 30% Ethanol Blend

India has removed excise duty on new higher-ethanol petrol blends, widening tax support for fuels above the existing E20 standard. The change covers mid-level blends, while E85 fuel for flex-fuel vehicles has just been launched nationwide, signalling a stronger policy push towards ethanol-based petrol.

The fresh exemption applies to petrol mixed with 22 percent to 30 percent ethanol, according to a government notification issued on Thursday. These blends, marketed as E22, E25, E27 and E30, will now face zero central excise duty, potentially altering relative pump prices once distribution starts at scale.

Regulatory standards and ethanol blending rules for higher mixes

The tax change builds on technical rules already issued by the Bureau of Indian Standards for advanced ethanol-petrol grades. Through the Gazette of India, BIS notified specifications under IS 19850:2026 for E22, E25, E27 and E30, setting limits for ethanol share, octane rating, sulphur, vapour pressure, impurities, testing and safety.

These norms, which took effect from May 15, 2026, created a framework for companies to design and certify higher blends before the tax relief was announced. The standards help align fuel quality, allow engine calibration by manufacturers and give regulators a reference point for monitoring compliance at refineries and retail outlets.

Policy milestones and ethanol blending targets in India

India, the world’s third-largest crude importer and fuel consumer, has treated ethanol blending as a core element of its broader biofuel strategy. The National Policy on Biofuels, 2018, was amended in 2022, moving the 20 percent blending goal forward from 2030 to Ethanol Supply Year 2025-26.

Public sector oil marketing companies reached 10 percent blending in June 2022, beating the ESY 2021-22 target by five months, the petroleum ministry informed Parliament in March 2025. Progress has quickened since then, with annual averages rising each year as additional distillery capacity and supply contracts came onstream.

According to the ministry, blending averages climbed to 12.06 percent in ESY 2022-23, 14.60 percent in ESY 2023-24 and 17.98 percent in ESY 2024-25 up to February 28, 2025. At that point, officials said no decision had yet been taken on targets or policies for blending levels beyond 20 percent.

Consumer concerns, ethanol blending economics and court challenges

The nationwide E20 rollout triggered questions from many motorists about fuel efficiency and engine compatibility, especially for older vehicles. In September 2025, the Supreme Court rejected a petition challenging the introduction of E20 across India, allowing the government’s programme to continue without changes ordered by the bench.

During that case, Attorney General R Venkataramani told the court the E20 decision was considered and would also bring benefits to sugarcane farmers, according to Reuters. The government opposed a plea for an option to buy only unblended petrol, arguing that the shift was not a "mindless application of switching out one system with another", Reuters reported.

The Society of Indian Automobile Manufacturers later stated that E20 could reduce mileage for some older vehicles, yet did not pose a safety risk, based on available test data. Car and two-wheeler makers have gradually updated new models for E20 compatibility, while legacy fleets continue using the same fuel.

Price comparisons have also drawn attention. In August 2025, the petroleum ministry explained that the weighted average procurement cost of ethanol had risen above the cost of refined petrol. For ESY 2024-25, as of July 31, 2025, the mean ethanol purchase price stood at Rs 71.32 per litre, including transport and GST.

Despite that higher input cost, policy moves continue. India recently introduced E85, a blend containing 85 percent ethanol for flex-fuel vehicles. Petroleum Minister Hardeep Singh Puri said state-run oil marketing companies would price E85 about Rs 20 per litre below E20 fuel, according to Reuters and domestic media reports.

Why ethanol blending is central to India’s energy strategy

Fuel imports form one of India’s largest external expenses because the country sources most crude oil from overseas suppliers. Ethanol is seen by policymakers as a domestic alternative that can partly displace imported crude, support farmers and diversify energy sources within the transport sector.

Speaking about India’s alternative-fuel pathway, Union Road Transport and Highways Minister Nitin Gadkari stressed both the economic logic and environmental gains. "The Petroleum Minister has also said that 87 per cent of fossil fuel is imported. Our policy is import-substitute, cost-effective, pollution-free, and indigenous," Gadkari asserted. "The biggest thing is that pollution will be less because this is a green fuel. The money that goes abroad for fuel imports will remain in the country and benefit farmers, rural youth, labourers, tribal communities, and the agriculture sector."

Every litre of ethanol used in blended petrol can slightly lower crude import needs and create extra demand for crops used as feedstock. The latest excise duty waiver for E22 to E30, layered over BIS standards and rising blend levels, confirms that higher ethanol use remains central to India’s long-term fuel strategy.