Budget 2022: Promotion of Blended Fuels

Energy security and sustainability are key priority areas for the nation. India being a largely agrarian economy, holds immense potential for domestic manufacturing of biofuels with 3-fold benefits - decarbonization, energy security, and benefit to farmers. Globally, numerous countries are promoting blending of fuel with bio-substitutes to be aligned with their net-zero targets.

India has developed numerous policies for production and acceptability of biofuels such as the National Biofuels policy. Ethanol blending in India has increased from ~1.5% in 2013-14 to ~8.5% in 2021-22. A large part of the 8 fold increase in ethanol procurement benefited the sugarcane farmers in the country. India is in fact the 5th largest producer of fuel ethanol, only behind USA, Brazil, EU and China.

Accelerating the pace of India’s energy transition, Hon’ble Prime Minister Shri Narendra Modi on the World Environment Day in 2021 had made more ambitious commitments for promotion of biofuels – to ensure a better environment and enrich the lives of Indian farmers. The PM mentioned the government’s resolve to achieve the target of 20% ethanol blending in petrol by 2025, preponing the target by 5 years.  

In the budget, Hon’ble Finance Minister Nirmala Sitaraman reaffirmed the fact that blending of fuel is a priority for this government. In order to encourage the efforts for blending of fuel, unblended fuel shall attract an additional excise duty of INR 2 per liter from 1st October 2022.

Most of the ethanol manufacturing units are based in 4-5 states where sugar production is high. Under the guidance of the report released by PM titled "Report of the Expert Committee on Road Map for ethanol blending in India 2020-2025", and the latest budget proposal, India targets to see a more equitable distribution of blended fuels across the nation.