NEW DELHI, INDIA – JULY 10: Members of the Indian Youth Congress raise slogans during a protest against Union Minister Nitin Gadkari over the ethanol-blended petrol issue on July 10, 2026 on Raisina Road in New Delhi, India. The Indian Junior Congress (IYC) on Friday staged a protest against the E20 ethanol blended petrol policy, accusing the Center of promoting measures that are said to harm vehicles and benefit ethanol manufacturers.
Hindustan Times | Hindustan Times | Getty Images
India, the world’s third-largest oil consumer, is testing alternative fuels such as corn-based ethanol and animal waste-derived biogas as rising global oil prices and possible Russian supply constraints threaten the country’s energy security.
The South Asian country plans to mandate 20% ethanol blending in gasoline five years ahead of schedule and expand production of compressed natural gas and compressed biogas, an alternative to liquefied natural gas.
According to local media reports, the government is considering blending diesel with 15% isobutanol, and last week also successfully tested the first hydrogen battery-powered train.
Alternative fuels are an increasingly important pillar of India’s energy security strategy, experts say, especially as the country faces rising global energy prices and supply constraints.
With Russia supplying a significant portion of India’s oil and geopolitical pressures mounting, “(energy) diversification is no longer an option,” Diwakar Murugan, senior auto analyst at Omdia, told CNBC.
Given the government’s energy diversification drive, Indian automakers are “de-risking” in the areas of compressed natural gas, hybrids, flex-fuel platforms and hydrogen for commercial vehicles, he added.
Oil prices have risen more than 25% so far this month as tensions between the United States and Iran intensify, with energy information firm Kupler warning that prices could rise above $100 a barrel if both the Red Sea and the Strait of Hormuz are closed.
Russian crude accounted for more than 50% of India’s crude oil imports in June, replacing supplies from the Middle East to the South Asian country, according to Kpler data.
In the first 15 days of this month, India bought 2.6 million barrels of Russian crude oil each day, more than 50% of its crude oil imports, Sumit Litria, principal research analyst at Kpler, told CNBC. But this dependence on Russia has made India the target of new sanctions from the US government, which proposes to impose 100% tariffs on buyers of Russian oil unless peace is reached with Ukraine by September.
India’s finances are already weakened by soaring oil prices, with consumer inflation at more than 4%, the highest level in 27 months. Since India meets about 88.5% of its crude oil demand through imports, alternative fuels that can even partially replace this demand will help the economy.
Ethanol for energy security
“Ethanol blending is emerging as one of the most effective crude oil replacement strategies in India,” Pankaj Srivastava, Rystad Energy’s senior vice president of commodity markets petroleum, told CNBC.
He said the gradual increase in blending would reduce gasoline imports and reduce dependence on crude oil, generating “significant foreign exchange savings” while supporting domestic agricultural and rural incomes.
Srivastava said the mandate to blend 20% ethanol in gasoline is expected to save nearly $4 billion a year until 2030, or $6.4 billion in a high-price scenario.
The ethanol blending program, launched in 2014, has generated foreign exchange savings of 1.97 trillion rupees ($20 billion) and replaced 31.6 million tonnes of crude oil, according to the government.
India has additional production capacity to further increase the blending of ethanol, up to 25%, but the government has put plans on hold as the original mandate faces public backlash. Car owners have expressed concerns that mixed fuels will damage their cars and reduce their mileage.
On Monday, several MPs raised the issue of the effects of ethanol blending on cars, but the government has repeatedly denied claims of any harm.
Omdia’s Murugan said that while Indian car companies have started manufacturing E20 (20% ethanol blended gasoline) compliant vehicles from 2023 onwards, owners of vehicles manufactured before 2023 “face twice the cost”.
Older vehicles that are not designed or tuned for E20 fuel can experience reduced fuel economy, compatibility issues with certain components, and higher maintenance requirements, experts say.
Car companies deny reports of widespread damage to vehicles from ethanol. However, a consumer court last week ordered Maruti Suzuki, the country’s largest automaker, to replace the car of a consumer who claimed damage caused by E20 fuel, according to a Reuters report.
