Big Update on Ethanol Blending! Petrol with 22%-30% blend gets excise duty exemption - Details

The Central Government has exempted petrol blended with 22 per cent to 30 per cent ethanol from central excise duty, a move aimed at encouraging higher ethanol blending in transport fuel and reducing dependence on imported crude oil.

The decision was notified through amendments to multiple central excise notifications issued by the Ministry of Finance, Department of Revenue.

Under the notifications, petrol containing 22 per cent, 25 per cent, 27 per cent and 30 per cent ethanol will attract a nil rate of excise duty, subject to specified conditions.

The exemption covers higher ethanol-blended petrol categories that have been added to existing excise duty notifications issued under the Central Excise Act and related provisions of the Finance Acts.

BIS Standards Made Mandatory

A key condition for availing the exemption is compliance with quality standards prescribed by the Bureau of Indian Standards (BIS). The notifications state that the ethanol-blended petrol must conform to the BIS specification.

This means only fuel meeting the prescribed technical and quality requirements will qualify for the excise duty exemption. The government has incorporated the BIS compliance requirement across all newly notified categories of higher ethanol-blended petrol.

Composition Requirements Specified

The notifications have also laid down detailed composition requirements for each ethanol blend category. According to the government, 22 per cent ethanol-blended petrol must consist of 78 per cent motor spirit, commonly known as petrol, and 22 per cent ethanol by volume.

Similarly, 25 per cent ethanol-blended petrol must contain 75 per cent petrol and 25 per cent ethanol. For the 27 per cent blend, the composition requirement is 73 per cent petrol and 27 per cent ethanol, while the 30 per cent blend must contain 70 per cent petrol and 30 per cent ethanol.

The notifications further require that applicable excise duties have been paid on the petrol component and the relevant GST-related taxes have been paid on the ethanol component.

Officials said the amendments have been made in notifications relating to basic excise duty, special additional excise duty, road and infrastructure cess, and agriculture infrastructure and development cess.

Ethanol Programme Helps Reduce Oil Dependence

The latest decision comes as the government continues to promote ethanol blending as part of its energy security strategy. Higher ethanol blending helps reduce the consumption of petrol derived from imported crude oil and supports the use of domestically produced biofuels.

India is the world's third-largest importer and consumer of crude oil and imports a significant share of its oil requirement.

According to government data, the ethanol blending programme has delivered substantial economic and environmental benefits since Ethanol Supply Year (ESY) 2014-15.

The programme has helped save about Rs 1.84 lakh crore in foreign exchange and resulted in the substitution of 302 lakh metric tonnes of crude oil. The government said the initiative has also led to a reduction of 909 lakh metric tonnes of carbon dioxide emissions during the period.

Farmers and Distilleries Seen Benefiting

The government said the ethanol blending programme has generated additional income opportunities for farmers and the biofuel industry.

According to official data, the programme has added earnings of about Rs 1.58 lakh crore to farmers by creating demand for feedstocks used in ethanol production.

Earlier, Petroleum and Natural Gas Minister Hardeep Singh Puri said that even a one per cent adoption of annual petrol vehicle sales in India during ESY 2026-27 could generate demand for around four crore litres of ethanol.

He said such a demand would result in payments of about Rs 266 crore to distilleries and help save nearly Rs 195 crore in foreign exchange.

According to the minister, it could also reduce crude oil imports by around 0.28 lakh metric tonnes and lead to a net reduction of nearly 0.86 lakh metric tonnes of carbon dioxide emissions.

Puri said around Rs 160 crore from such ethanol demand would flow directly to Indian farmers instead of being spent on oil imports. He said the benefits could increase further as flex-fuel technology expands across India's large two-wheeler market.