The government of India is preparing to move beyond the current 20% ethanol blending level (E20) by supporting the rollout of flex-fuel vehicles capable of using higher ethanol blends, according to Tarun Kapoor, Advisor to the Prime Minister.
Speaking virtually at the fourth edition of The India Sugar & Bio-Energy Conference 2026 on September 9, Kapoor said the E20 programme had been successful and that the next phase would involve higher blending levels alongside greater availability of ethanol at fuel stations.
“Now our focus is on going into flexi-fuel vehicles and allowing blending at a percentage which will be higher than E20,” Kapoor said.
Higher ethanol blends linked to flex-fuel vehicles
The proposed shift would require changes across both the vehicle and fuel-supply sides of the market. Flex-fuel vehicles are designed to operate on gasoline containing substantially higher proportions of ethanol, allowing fuel retailers to offer blends above E20 without restricting their use to vehicles specifically calibrated for the lower blend.
Kapoor said several automobile companies have announced plans to introduce flex-fuel vehicles in the near future. He also stressed that the availability of neat or pure ethanol at fuel outlets would need to expand as these vehicles enter the market.
The development could create a new demand channel for India’s ethanol industry, which has expanded significantly during the country’s E20 programme.
Ethanol capacity now exceeds blending requirements
According to Kapoor, India’s ethanol production capacity has now surpassed the country’s requirements for blending. This creates a new challenge for producers and policymakers: finding additional applications for ethanol beyond conventional petrol blending.
The government is therefore encouraging the industry to explore alternative uses and higher-value applications to absorb available production capacity.
The Print reported that Kapoor also pointed to the need for the sector to diversify into products and applications beyond the existing ethanol-petrol market.
The push for additional ethanol demand is also taking place against a backdrop of global oil-market uncertainty. Kapoor cited the disruption caused by the West Asia crisis and crude oil prices approaching US$100 a barrel as reasons for strengthening domestic energy resources.
“It is important that we try to have whatever is available in the country,” he said.
Government defends E20 performance
Kapoor also addressed criticism surrounding the transition to E20 petrol, arguing that some concerns have been driven by misinformation or other motivations.
He said studies indicate that E20 performs well and that any marginal reduction in fuel efficiency is offset by ethanol’s higher octane value.
The comments come as the government seeks to build confidence around higher ethanol utilisation while moving the market towards vehicles that can accommodate a broader range of ethanol blends.
Biofuels policy expands beyond petrol
The government’s biofuel strategy is also beginning to look beyond the petrol pool.
On diesel, Kapoor said authorities are examining biofuel-based additives, with experiments involving isobutanol potentially opening another significant market for biofuels if the technology proves successful.
The opportunity is linked to the scale of India’s diesel consumption, with diesel representing a substantial share of refinery output. Successful development of suitable biofuel applications for diesel could therefore provide another route for expanding domestic renewable-fuel demand.
Ethanol producers urged to enter CBG
Kapoor also called on ethanol manufacturers to diversify into compressed biogas (CBG) and other value-added products, including potash.
The government has recently introduced the GOBARdhan scheme, bringing together incentives from multiple ministries to encourage investment in CBG production. Kapoor acknowledged that progress in the CBG sector has so far been limited and urged existing biofuel companies to consider the opportunity.
For ethanol producers, diversification into CBG could provide a way to make greater use of agricultural and organic waste streams while reducing dependence on a single fuel market.
Next phase of India’s biofuel expansion
The proposed move beyond E20 marks a potential second phase in India’s ethanol-blending programme. Rather than relying solely on progressively increasing ethanol demand from conventional petrol vehicles, the government is looking to create a more flexible fuel market through flex-fuel vehicles, wider ethanol availability and new biofuel applications.
Kapoor also assured the industry that the government remains committed to the sector and intends to provide greater certainty for existing investments as the market develops.
The immediate challenge will be aligning vehicle availability, fuel-station infrastructure, ethanol supply and policy implementation so that higher blending can translate into actual market demand. At the same time, the push towards CBG, isobutanol and other value-added products suggests that India’s biofuel strategy is increasingly moving from a single-fuel blending programme towards a broader bioenergy market.
Bioenergy Business Analysis
India’s next challenge is no longer simply producing enough ethanol for E20, but creating sustained demand for the country’s growing biofuel capacity. Moving to higher blends through flex-fuel vehicles could open a significant new market, while diversification into CBG, isobutanol and other products could reduce the industry’s dependence on petrol blending alone. The key test will be execution: vehicle rollout, ethanol availability at fuel stations and policy certainty will determine how quickly India’s biofuel industry can convert excess production capacity into new commercial opportunities.
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