Key facts
- India has waived excise duty on the blending of petrol with more than 20% ethanol.
- The exemption applies only to the blending activity, not to petrol or ethanol separately.
- This policy aims to reduce India's dependence on imported crude oil.
- Higher ethanol blends may require vehicle modifications and are not compatible with all existing vehicles.
- The government is also promoting flex-fuel vehicles and has launched E85 fuel at select locations.
India has exempted excise duty on the process of blending petrol with more than 20% ethanol, extending a previous waiver. This move is part of the government's strategy to reduce reliance on imported crude oil, especially amid global energy security concerns. The exemption applies solely to the blending activity, which is considered a manufacturing process, while petrol and ethanol themselves remain taxed separately.
While the exemption is seen as a prerequisite for introducing higher ethanol blends, the Ministry of Petroleum and Natural Gas stated that extensive testing and consultation are required before any rollout. The current standard for petrol sold in India is E20, containing 20% ethanol, and most vehicles manufactured in recent years are compatible only with this blend. Fuels with higher ethanol content can potentially damage engines not designed for them.
To further promote ethanol use, the government is also supporting flex-fuel vehicles capable of running on much higher ethanol blends. Recently, state-run oil companies introduced E85 fuel, an 85% ethanol and 15% petrol mixture, at select retail stations. This push is further supported by a significant expansion in India's ethanol production capacity, which now nearly doubles current consumption levels.