Strategic Autonomy: Prioritizing India’s Ethanol Transition

DIPAK KURMI

The specter of energy insecurity has haunted global economies since the mid twentieth century, yet few nations have managed to decouple their transport sectors from the volatility of West Asian geopolitics as effectively as Brazil. In November 1975, merely two years after the inaugural global oil shock triggered by the Arab Israeli Yom Kippur War, Brazil initiated its landmark Proálcool programme. This was not merely a reactive measure but a visionary mandate aimed at eroding the nation’s crippling dependence on imported crude. By requiring all petrol sold within its borders to contain a minimum of 11 percent anhydrous ethanol, Brazil laid the foundational stones for a renewable fuel revolution. When the second oil crisis emerged in 1979 following the Islamic Revolution in Iran, the Brazilian government pivoted further by introducing vehicles engineered to run on 100 percent hydrous alcohol, which contains 5 to 6 percent water compared to the near purity of anhydrous ethanol. This trajectory culminated in 1985 with domestic production hitting 1,200 crore litres, facilitating a retail landscape where fuel stations offered a choice between blended Gasoline C and pure E100.

The evolution of the Brazilian model reached a technological zenith in 2003 with the commercial launch of flex fuel vehicles. These machines, equipped with sophisticated electronic sensors, could detect varying ethanol gasoline blends and automatically recalibrate fuel injection and spark timing. By March 2015, the minimum blend in Gasoline C was hiked to 27 percent, eventually reaching 30 percent by August of that year. The sheer scale of this transition is reflected in Brazil’s 2024 consumption data, where total fuel alcohol usage reached 3,492.4 crore litres. Within this figure, 2,289.6 crore litres were consumed as E100, while 1,202.8 crore litres were utilized in the Gasoline C blend. While the nominal blend rate for Gasoline C remains at 30 percent, the integrated mix for the entire light duty vehicle fleet stands at a staggering 51.8 percent. This signifies that more than half of the energy powering the nation’s automotive fleet is derived from alcohol, providing a robust buffer against the price fluctuations of Brent crude.

India now stands at a similar historical crossroads, driven by a domestic imperative to slash an oil import bill that covers nearly 90 percent of its requirements. Prime Minister Narendra Modi recently underscored in Parliament that ramped up ethanol blending efforts have already begun to yield dividends in reducing import reliance. The urgency of this shift is magnified by the cyclical nature of oil shocks, from the record 147.50 dollars per barrel in 2008 to the 139.13 dollars peak in 2022 following the invasion of Ukraine. With the current geopolitical tensions involving the US, Israel, and Iran creating a third modern shock, industry leaders like CK Jain of the Grain Ethanol Manufacturers Association argue that this is a definitive wake up call. The proposed strategy involves working synergistically with the automotive industry and Oil Marketing Companies (OMCs) to elevate the blending mandate from 20 percent to 30 percent while incentivizing the mass production of flex fuel vehicles capable of utilizing E100.

The statistical progress of India’s ethanol programme over the last decade is nothing short of transformative. In the 2013-14 supply year, the quantity of ethanol supplied to OMCs was a meager 38 crore litres, representing a blending ratio of just 1.6 percent. By the 2024-25 cycle, these figures surged to 1,039 crore litres and an average blending ratio of 19.2 percent. Historically, production was constrained to distilleries attached to sugar mills using C heavy molasses, a byproduct with lower sucrose availability. However, a policy shift in 2018-19 incentivized the use of B heavy molasses and direct sugarcane juice by offering higher ex distillery prices to compensate mills for the revenue lost from reduced sugar recovery. This diversification was further bolstered by opening the doors to grain based feedstocks, including maize, damaged foodgrains, and surplus rice from the Food Corporation of India (FCI), which now play a dominant role in the supply chain.

The current supply architecture reveals a heavy reliance on the grain route to sustain momentum. Of the 1,039 crore litres supplied in 2024-25, over 69 percent or 718 crore litres originated from grains. For the 2025-26 supply year, OMCs have already contracted 1,058 crore litres, with grain based ethanol accounting for 766 crore litres and sugarcane based feedstocks contributing 292 crore litres. The financial framework supports this variety through a tiered pricing structure. Currently, ethanol from C heavy molasses is priced at 57.97 rupees per litre, while B heavy molasses commands 60.73 rupees. Sugarcane juice and syrup sit at 65.61 rupees, whereas grain based ethanol prices are 60.32 rupees for FCI rice, 64.00 rupees for damaged grains, and a premium 71.86 rupees for maize. This pricing strategy ensures that distilleries remain viable regardless of the specific feedstock availability or seasonal agricultural fluctuations.

Despite these gains, significant fiscal and structural hurdles remain if India is to truly replicate the Brazilian success story. A primary concern is the disparity in taxation; currently, ethanol used for blending attracts a 5 percent Goods and Services Tax (GST), while petrol remains outside the GST ambit, burdened by varying Central excise duties and State value added taxes. Because ethanol blended petrol and pure petrol are treated as identical for tax purposes, there is little direct consumer incentive to choose higher blends. Advocacy groups suggest that all ethanol blends, whether E20, E30, or E100, should be brought under a unified GST regime to ensure price parity and transparency. Furthermore, while India possesses a production capacity exceeding 1,800 crore litres per annum, the retail infrastructure must evolve to include separate dispensing units for higher ethanol concentrations, allowing consumers to choose fuel based on cost efficiency and vehicle compatibility.

The road ahead requires a fundamental shift in how the internal combustion engine is perceived in the era of decarbonization. While electric vehicles are a critical component of the green transition, they face limitations in total fleet replacement speed and infrastructure depth. Tarun Sawhney of Triveni Engineering & Industries Ltd points out that India’s surplus in sugarcane, rice, and maize provides a unique domestic advantage that can be leveraged for E30 and E100 fuels. The focus must now transition from merely increasing production capacity to ensuring that every new vehicle rolling off the assembly line is flex fuel compliant. Additionally, the government could facilitate the transition of the existing vehicular fleet by encouraging the development and distribution of conversion kits. By integrating these technological, fiscal, and agricultural strategies, India can transform its vulnerability to global oil shocks into a sustainable, homegrown energy triumph that rivals the pioneering spirit of Brazil.

(Email: dipakkurmiglpltd@gmail.com)