More Stories

Informist, Monday, Jun. 15, 2026

 

NEW DELHI – India's ambition to move beyond 20% ethanol blending in petrol could be constrained by feedstock availability, inadequate infrastructure, pricing mechanisms, and slow adoption of flex-fuel vehicles, KPMG said in a report. According to the consultancy firm, the biggest challenge is that the current ethanol ecosystem is designed around E20, effectively capping the demand. The existing infrastructure is designed for a uniform E20 supply rather than differentiated delivery of multiple fuel blends beyond E20, the report said. 

 

Recently, Maruti Suzuki and Hero MotoCorp launched the country's first flex-fuel car and motorcycles that can run on petrol blends ranging from E20 to E100. Meanwhile, the government began dispensing E85 fuel at nearly 50 retail outlets, priced INR 20 lower than E20 to attract consumers. 

 

"This marks a shift from a single-blend system to a diversified ethanol-driven fuel architecture," the report said. However, the next phase will require moving from a fixed blending mandate to a flexible transport fuel system that supports higher ethanol blends.

 

"While higher-blend standards (E22-E30) have been notified, demand beyond E20 is not yet established at scale," the report said. "The transition to higher blends introduces uncertainty on demand location, scale and timing. Multi-grade systems require significant retail and supply chain reconfiguration." In addition, supply availability has begun to outpace near-term demand and is likely to continue to do so unless consumption of higher blends and flex-fuel vehicles picks up. 

 

India's ethanol production is heavily dependent on first-generation feedstocks such as sugarcane and grains, which are food crops, and production is resource-intensive. While second-generation feedstocks, such as agricultural residues, can diversify feedstocks, the technology is costlier. "Incremental investments, particularly in second generation, carry higher cost and increased policy dependence." 

 

The report also highlighted that the existing pricing mechanism linking ethanol procurement prices to feedstock costs is government-fixed rather than market-driven. As India scales up ethanol use, a framework that better reflects market dynamics would become increasingly important. 

 

"Operational constraints for OMCs (oil-marketing companies) suggest that a transition toward source-agnostic ethanol pricing could help simplify procurement and reduce administrative complexity."

However, a fully market-determined pricing regime may introduce volatility, given exposure to both agricultural feedstock cycles and global fuel price movements, it added. 

 

Although automobile manufacturers have recently launched flex-fuel vehicles, wider adoption will require incentives to both automakers and consumers. "Adoption is influenced by perceived economic advantage as the pricing benefits of ethanol blending are not fully passed on to consumers, combined with higher upfront costs of FFVs," the report said. Performance trade-offs, such as lower fuel efficiency at higher ethanol blends compared to petrol, affect decision-making in the absence of compensation for mileage loss, it added.

 

Moving beyond E20 requires an adaptive system that aligns ethanol utilisation with global market conditions. "The challenge ahead lies not in the incremental scale-up, but in system-level evolution," the report said. End

 

Reported by Afra Abubacker

Edited by Saji George Titus

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (22) 6985-4000 /+91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.