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Petrol prices continue to remain above the Rs 100-per-litre mark in most major cities.
The excise-duty exemption is being given to fuel producers and oil companies.
In a significant push towards cleaner and domestically produced fuels, the Centre has removed excise duty on petrol blended with higher levels of ethanol, specifically fuels containing between 22 per cent and 30 per cent ethanol. The decision comes days after India notified standards for E22, E25, E27 and E30 fuels and launched E85 petrol in select markets, signalling the next phase of the country’s ethanol-blending programme.
The move is aimed at encouraging oil companies to produce and sell more ethanol-blended fuelreducing India’s dependence on imported crude oil, especially amid rising geopolitical tensions, and supporting the government’s biofuel ambitions.
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But for millions of Indians who pay over Rs 100 a litre for petrol, the immediate question is – will this make fuel cheaper? While the move could bring down petrol prices, a relief may not come immediately.
Why Has Government Removed Excise Duty On Ethanol Fuel?
India imports nearly 85 per cent of the crude oil it consumes. This makes the country highly vulnerable to global oil price shocks and geopolitical crises like the current one created due to the US-Iran war.
To reduce this dependence, the government has steadily increased ethanol blending in petrol. In 2014, ethanol blending stood at just 1.5 per cent. Today, India has achieved around 20 per cent blending in many parts of the country, years ahead of its original target.
Now, the government wants to move beyond E20 and accelerate the adoption of E22, E25, E27 and E30 fuels. Removing excise duty on these higher blends makes them cheaper to produce and more attractive for oil marketing companies.
How Expensive Is Petrol Today?
Petrol prices continue to remain above the Rs 100-per-litre mark in most major cities. For a middle-class commuter using around 50 litres of petrol every month, fuel expenses can easily cross Rs 5,000 monthly and Rs 60,000 annually.
This explains why any announcement related to fuel prices immediately attracts public attention.
Could This Reduce Prices At The Pump?
The excise-duty exemption is being given to fuel producers and oil companies. There is no direct reduction in the retail price of petrol today. However, the government’s broader calculation is that ethanol-rich fuels are cheaper to produce than petrol derived entirely from crude oil.
A glimpse of that future emerged recently when India launched E85 fuel in Delhi at around Rs 82 per litre. Compare that with regular petrol, which currently costs around Rs 102 per litre in the capital. That’s a difference of nearly Rs 20 per litre.
However, there is a catch: most vehicles currently on Indian roads cannot run on E85 fuel.
How Much Ethanol Does India Produce?
India’s ethanol industry has expanded rapidly over the past decade.
According to government estimates, India now has ethanol production capacity exceeding 1,700 crore litres annually. Around 1,016 crore litres are required every year to sustain 20 per cent ethanol blending in petrol. Total ethanol demand, including industrial uses, is expected to reach around 1,350 crore litres annually.
The expansion has turned ethanol into a major new revenue stream for sugar mills and farmers.
Why Does Ethanol Cost Less?
Unlike petrol, which depends on imported crude oil priced in global markets, ethanol is produced domestically. Crude oil prices can fluctuate dramatically because of wars, supply disruptions and decisions by oil-producing nations.
Ethanol, by contrast, is sourced from Indian agricultural produce. This means that increasing ethanol blending can lower the amount of imported petrol required in every litre sold.
Even a 20 per cent blend means one-fifth of the fuel comes from domestic sources rather than imported crude.
What Does This Mean For The Common Indian?
The excise-duty waiver will not immediately lower the price displayed at petrol pumps. But it is an important step in a larger strategy aimed at making fuel less dependent on imported crude oil.
For consumers, the immediate impact will be limited. The long-term impact, however, could be significant if higher ethanol blends become widely available and flex-fuel vehicles become commonplace.
The government’s message is clear: India’s future fuel mix will contain much more ethanol than it does today.
For motorists paying more than Rs 100 per litre, the hope is that as domestic ethanol production scales up and newer fuel blends become mainstream, the savings seen in fuels like E85 could eventually translate into lower fuel bills as well.
Whether that promise materialises will depend on how quickly the country’s vehicles, fuel infrastructure and ethanol industry evolve over the next few years.
About the Author
Pragati is a News Editor at news18.com. Having headed the Business and Viral sections, Pragati now ideates, writes and edits long-form features and articles on national and global affairs. She ensures…Read More
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