The central government recently announced that higher ethanol-blended petrol variants will not be subject to excise duty. The move applies to petrol that contains 22% to 30% ethanol, including E22, E25, E27 and E30, and is part of the country's push to cut down on crude oil imports and enhance energy security.
According to a government notification, petrol variants with 22%-30% ethanol will now be exempt from the central excise duty, provided they meet the specification of the Bureau of Indian Standards (BIS), IS 19850:2026 and all taxes on petrol and ethanol have already been paid.
The standards, which came into effect on May 15, 2026, define everything from ethanol content and octane ratings to sulfur limits, testing procedures and safety requirements.
Over the last few years, India's ethanol production capacity has grown rapidly. As shared by the government in Parliament, there are around 20-21 billion liters of ethanol installed in the country and the demand for ethanol under the existing E20 program is about 10-12 billion liters per year.
In June 2022, the blending rate for oil marketing companies was 10%, ahead of schedule. Blending reached 12.06% in ESY 2022-23, 14.60% in ESY 2023-24, and 17.98% by February 2025.
Bharati Balaji, deputy director general at All India Distillers Association, said: "For the distilling industry, this is a powerful demand-side signal; it creates a clear commercial pathway to deploy our surplus ethanol production capacity, which currently stands well above E20 program requirements."
"We urge state governments to complement this measure with aligned tax structures so that the full benefit reaches both industry and consumers at the pump," he added.
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Currently approved vehicles that meet the AIS 171 standards for higher ethanol blends will be able to operate on them and most of the existing petrol vehicles will only work on E20.
Petroleum and Natural Gas Minister Hardeep Singh Puri launched E85 on World Environment Day, June 5; gas with 85% ethanol is a sign of the government's broader goals. The initial rollout covers 48 fuel stations operated by public-sector oil marketing companies across the country, with the fuel being sold at a lower price than conventional ethanol blends.
Puri said the network of E85 outlets is expected to expand, with 50-100 dispensing stations likely to be operational within weeks. The government aims to increase the number to 500 by the end of 2026 and 5,000 by the close of 2027. According to the minister, E85 will be priced about Rs. 20 per litre cheaper than E20 fuel.