The Ethanol Answer To India's Energy Emergency

Last Updated:April 23, 2026, 16:11 IST

Expanding ethanol's use across sectors, supported by selective imports and stronger policy mandates, can reduce dependence on crude imports and enhance energy security.

The effective closure of the Strait of Hormuz in March has turned India’s energy vulnerability from theory into reality. With more than 50% of India’s crude oil and natural gas imports transiting this narrow waterway, and with the nation’s total crude and petroleum reserve stock covering for about 60 days, policy action needs to be structural not incremental. The Philippines, which had a greater exposure to this chokepoint, moved to declare a National Energy Emergency on March 24.

To preempt such a scenario, India must respond with commensurate urgency to switch to alternate fuel sources with ethanol as the most immediate lever available. It is a clean fuel, draws on underutilized domestic capacity, and lends price stability when crude prices soar. Ethanol also stands out because India already has the infrastructure to act immediately. Building on domestic supply as the foundation, India’s ethanol pivot must be ambitious with newer sectoral mandates, engineering and standards harmonization, global partnerships and import readiness.

Urgently Expand Domestic Usage Mandates

India’s ethanol programme has made significant progress. Achieving the E20 blending milestone ahead of schedule in March 2025 saved over $14 billion in foreign exchange and replaced nearly 20 million metric tonnes of oil imports. Yet E20 represents only 55% of domestic capacity, leaving about 9 billion liters annually as a latent strategic reserve requiring no foreign exchange or exposure to maritime chokepoints.

Limiting ethanol-blending to petrol alone would be a failure of strategic imagination. While the recent policy indications to enable usage across flex-fuel vehicles, aviation and commercial applications are steps in the right direction, bold mandates across these and other sectors such as domestic, maritime and diesel transport must be urgently integrated into the national framework. Fast-tracking mandates across aviation, maritime and domestic sectors bring tangible cost and emission reduction benefits, while reducing India’s exposure to crude supply shocks. Diesel accounts for 70% of transport sector’s petroleum consumption and breakthroughs in ethanol-to-biodiesel pathway will give India a first-mover industrial advantage.

At the same time, blending targets require addressing legitimate technical concerns. Ethanol’s hygroscopic nature poses risks in humid conditions, where moisture absorption can cause phase separation and engine corrosion. Older vehicles may face efficiency and longevity risks from higher blending mandates alone. A credible expansion strategy must pair blending with a holistic plan that addresses legacy fleet adaptations, technical safeguards in fuel supply chains, and consumer confidence building measures.

Global Supplies Complement, Don’t Compete

While expanding ethanol mandates across sectors is necessary, capping targets to match domestic capacity hinders both the scale and speed of energy transition. The global market also offers a slight arbitrage opportunity, with anhydrous imported ethanol trading at roughly Rs. 59 per liter versus Rs.65-66 per liter, produced domestically from sugarcane juice or maize. Strategic imports would not only reduce supply costs but also build ethanol reserves that buffer against energy chokepoints.

Instruments such as Tariff Rate Quota (TRQ) which permit imports only where domestic supply falls short of demand, while prioritizing domestic procurement, should be considered. TRQs can also support India with the required scale of response while preserving farmer interests. Industry assessments suggest that several hundred thousand tonnes could be sourced in the near term. With Vietnam and other Asian countries already entering the key markets, early action by India is not merely prudent but essential.

Looking Beyond the Immediate

Brazil offers India a proven model, as its lessons go beyond simple blending ratios. The country built flex-fuel vehicles engineered for the E20–E100 range, scaled distribution infrastructure, and a consumer market that treats ethanol as a flexible fuel choice rather than a regulatory mandate. As a result, consumers naturally increase ethanol use when crude prices rise, absorbing price shocks without constant government intervention.

India remains tied to the petrol engine framework, optimizing blending in systems not built for high-ethanol use. Breaking this ceiling requires flex-fuel compatibility in all new vehicles and an ecosystem-wide transition across other sectors covering engineering and standards, fuel supply chains and storage, and measures to boost consumer adoption. This will position ethanol as a genuine energy security instrument while creating a much-needed buffer.

India’s Ethanol Moment Cannot Wait

India’s ethanol programme has earned a well-deserved reputation as a successful energy transition initiative. It now requires a meaningful expansion of ambition, from newer usage mandates to flexible blending targets. Ethanol must become a central pillar of India’s alternative energy plan, supported by a clear-eyed priority for full domestic capacity utilization complimented by global supply partnerships to provide the scale.

With the requisite mandates, ecosystem compatibility, favorable offtake agreements, ethanol will not only help fast-track India’s energy security needs but will put in place a stronger hedge against the ongoing and future energy supply shocks. Infrastructure, technology and supplies exist, what remains is a policy decision to scale-up and speed.

Anuj Gupta and Vaman Desai are Managing Director and Senior Director at BowerGroupAsia India, respectively. Views expressed are personal.

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