Government Begins Talks with Auto OEMs on New Ethanol Blending Targets for India

According to Moneycontrol news report, the Indian government has initiated talks with automobile manufacturers to explore the feasibility of increasing ethanol blending in petrol beyond the current target of 20%. As the nation is on track to achieve this goal by October 2025, with 19.8% already reached in March, a committee involving officials from key ministries is drafting a plan for higher blending ratios, which will be reviewed for Cabinet approval. The government’s broader vision includes reaching a 30% blend by 2030.

Challenges for OEMs: Cost, Investment, and Demand Concerns

Automobile companies, including leading names like Tata Motors, Maruti Suzuki, and Mahindra & Mahindra, have expressed apprehensions regarding the significant investments needed for engines compatible with ethanol blends above 20%. Experts estimate a cost increase of 2.5% to 4% per vehicle due to required modifications in engine and exhaust systems. 

Some firms have showcased capability for E85 engines, but a large-scale shift to E30-compliant vehicles could demand an additional ₹15,000 crore investment. Reports also highlight that existing vehicles could use higher ethanol blends, but would face higher maintenance and reduced mileage. Moreover, companies argue that pushing further investments while the industry is still recovering from COVID-related downturns and global uncertainties may not be practical.

Market Sentiment, Fuel Availability, and Investment Outlook

Passenger vehicle sales showed minimal growth in FY25, rising just 2% to 4.3 million units, with a notable dip in urban demand. In contrast, rural areas saw a 5% rise in sales, prompting manufacturers to expand their presence in smaller towns. Despite readiness from some automakers to offer flex-fuel vehicles, a lack of consistent ethanol fuel availability across the country is a major barrier. 

Companies stress that without nationwide fuel infrastructure, commercial production of such vehicles remains unviable. Indian automotive component manufacturers are projected to invest between $2.5 billion and $3 billion (approximately ₹18,000 crore to ₹25,000 crore) in the coming years. Simultaneously, automobile original equipment manufacturers (OEMs) are anticipated to finalise investments totalling $9 billion by 2027, with the primary objective of expanding production capacity.

Read more: India’s Ethanol Journey: Policy Push and Measures Beyond the 20% Blending Target

Conclusion

India’s ethanol push is ambitious, but success hinges on fuel availability, industry readiness, and practical timelines to balance sustainability with feasibility. 
 

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