India Exempts Central Excise Duty on Higher Ethanol Blended Petrol

In a bid to boost the adoption of biofuels, the Indian government has announced an exemption from central excise duty for petrol blended with ethanol in the range of 22% to 30%. The decision was made public on June 10, 2026, and applies to specific blends of petrol with higher ethanol content, including 22%, 25%, 27%, and 30%.

This initiative aims to support the growing ethanol industry in India while allowing consumers to benefit from a potential decrease in fuel costs. The Bureau of Indian Standards (BIS) had earlier set fuel standards for these blends on May 19 of this year, although they are not yet commercially available.

According to a government statement, this exemption does not imply that higher blends will be rolled out immediately. "This is a preliminary prerequisite for eventually introducing higher blends but doesn’t convey anything about rollout of higher blends as of now as that will only be done after extensive testing and consultation," the statement clarified.

The exemption specifically addresses the blending of ethanol into petrol, considering it a manufacturing activity. The government intends to prevent double taxation, as petrol already incurs central excise duty and ethanol is subject to goods and services tax (GST) at their respective processing stages. The blended product, if taxed again, could lead to higher costs for consumers.

Previously, the Ministry of Finance had also exempted excise duty on petrol blended with ethanol up to 20%. This recent measure builds on earlier policies, ensuring that previously levied duties are not applied a second time on the newly created blends.

This announcement follows the formal introduction of E85, a variant comprising 85% ethanol and 15% petrol, which took place on June 5, 2026. E85 is priced approximately ₹20 cheaper per litre than the E20, the standard petrol blend.

Industry representatives have expressed optimism regarding this policy shift. C.K. Jain, President of the Grain Ethanol Manufacturers Association (GEMA), called the exemption a "strong signal of policy stability and long-term commitment." Jain highlighted the importance of such measures in attracting investments along the ethanol value chain, including production, logistics, and retail operations.

Similarly, Bharati Balaji, Deputy Director General at the All-India Distillers Association (AIDA), praised the government's move and urged state governments to align their tax structures to ensure that both industry and consumers gain from this initiative at fuel stations.

In conclusion, the exemption of central excise duty on higher ethanol blends of petrol represents a significant step in advancing India's biofuel policies, potentially paving the way for increased production and consumption of renewable fuel alternatives nationwide.