India’s push to blend 20% ethanol with petrol aimed to reduce crude oil dependence and support farmers by using surplus sugar for ethanol production. Although ethanol costs less than petrol, this has not translated into lower fuel prices for consumers. Petrol prices across most states hover between ₹100 and ₹104 per litre, despite ethanol’s cheaper production cost. Fuel prices in India are influenced by global crude oil rates and taxes like excise duty and VAT, which have remained relatively stable except for a recent excise duty hike that hasn’t been passed on to buyers.
A key reason for higher costs is ethanol’s lower energy content compared to petrol, meaning vehicles consume more fuel to travel the same distance, increasing running costs. Ethanol prices also vary based on their source, with some types costing more after transport and taxes are added. This suggests that blended petrol should cost around ₹95 per litre, a rate currently only seen in Delhi.
While the ethanol blending program has helped cut crude oil imports and boost the economy, consumers haven’t benefited from lower prices. The government plans to increase ethanol blends to 27-30
