Beyond E20: KPMG calls for ethanol to become a core pillar of India’s transport fuel system
India has achieved its E20 ethanol blending target ahead of schedule, but KPMG says future growth requires higher blends like E30, E85 and E100, expanded feedstocks, flex-fuel infrastructure, market-linked pricing and second-generation ethanol to strengthen energy security and reduce crude dependence.
New Delhi: India’s ethanol blending programme has reached a turning point, with the next phase of growth requiring a shift beyond E20 toward a broader and more flexible ethanol-based fuel ecosystem, according to a strategic report by KPMG.
The report said India’s Ethanol Blended Petrol (EBP) programme has transformed over the past decade from a limited blending initiative into a large-scale and integrated transport fuel system. Ethanol blending increased from around 1.5 per cent in 2013–14 to achieving the E20 target ahead of schedule in 2025–26, supported by coordinated efforts across agriculture, distillation, Oil Marketing Companies (OMCs), logistics and fuel retail networks.
According to the report, ethanol has become an essential part of India’s transport fuel structure and has contributed to lowering crude oil imports, generating foreign exchange savings, reducing carbon dioxide emissions and supporting rural incomes through stronger agricultural linkages.
However, KPMG stated that reaching E20 should be viewed as an important milestone rather than the final goal. The report argued that ethanol now needs to move from being a fixed blending component to playing a more central role in India’s transport energy framework.
Describing ethanol as a potential “transport energy backbone,” the study said greater use of domestically produced fuel could improve energy security, reduce dependence on global crude markets and strengthen India’s ability to manage fuel price fluctuations. It added that this approach could also help ease inflationary pressures and improve fuel system stability.
The report outlined a transition from a single-blend model to a diversified fuel structure that includes higher ethanol blends such as E22–E30 and flex-fuel pathways including E85 and E100. It noted that early developments, including the introduction of flex-fuel vehicles and initial infrastructure support for higher blends, indicate that the transition has already started.
At the same time, KPMG identified several structural barriers that could limit expansion beyond E20. These include dependence on first-generation feedstocks such as sugarcane and grains, concerns over long-term scalability and resource use, demand limitations under fixed blending mandates, pricing rigidity under the current procurement framework, infrastructure gaps for distributing multiple fuel grades and low adoption of flex-fuel vehicles.
To address these issues, the report proposed a system-wide transformation based on five priorities: expanding feedstock options, creating demand beyond E20 limits, making pricing more market-responsive, upgrading infrastructure for multi-grade fuel delivery and strengthening the vehicle ecosystem.
The study particularly highlighted the role of second-generation (2G) ethanol produced from agricultural residues, municipal solid waste and other non-food feedstocks as essential for long-term growth without adding pressure on food systems and natural resources.
One of the report’s central ideas is the concept of ethanol serving as a “crude shock buffer.” Under this approach, ethanol use could increase during periods of high crude oil prices or supply disruptions to reduce import dependence and offset fuel costs. During periods of lower crude prices, ethanol utilisation could remain stable or be redirected to other applications such as sustainable aviation fuel (SAF).
According to KPMG, such a flexible mechanism would help make the transport fuel system more resilient and less vulnerable to external market disruptions.
The report concluded that India’s next phase of ethanol development will depend on coordinated action among producers, OMCs, automobile manufacturers and consumers. By moving from fixed blending targets to a more adaptive and market-responsive fuel system, India can position ethanol as a central element of its long-term transport energy strategy while supporting decarbonisation, domestic value creation and energy security.
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Source : ChiniMandi
