Archive · 21 Jul 2026
Oil Firms Pay More for Ethanol Than Petrol
Oil companies in India are buying ethanol for a higher price than the cost of petrol it replaces.
The government says this helps save money on foreign oil and reduces pollution.
However, some experts argue that at current oil prices, ethanol is not cheaper to use.
The government has not decided to increase ethanol blending beyond 20% yet.
They say blending has saved a lot of money and reduced pollution, but there are concerns about the cost and effectiveness of using ethanol.
Oil firms are paying Rs 70.2 per litre for ethanol, higher than the pre-tax cost of petrol (Rs 53 per litre).
India procured 705.43 crore litres of ethanol in 2025-26, with a total value of Rs 49,577 crore.
The average crude oil cost in FY27 is Rs 57.42 per litre, down from Rs 69.28 in April.
The government has saved Rs 1.97 lakh crore in foreign exchange and avoided 952 lakh tonnes of CO₂ emissions through ethanol blending.
No decision has been made to increase ethanol blending beyond 20%, pending further studies and consultations.
- Who
- Oil marketing companies (OMCs) and the Indian government
- What
- Oil firms are paying more for ethanol than the pre-tax cost of petrol it displaces
- When
- Ethanol Supply Year 2025-26 (up to June)
- Where
- India
- Why
- To reduce crude oil dependency, save foreign exchange, and lower CO₂ emissions
Pro-Ethanol Blending
Anti-Ethanol Blending
Cost-Effectiveness
Pro-Ethanol Blending
Ethanol blending saves foreign exchange and reduces carbon emissions, beneficial in the long term.
Anti-Ethanol Blending
At current crude prices, ethanol blending is not cost-effective due to higher procurement costs compared to petrol.
Environmental Benefits
Pro-Ethanol Blending
Ethanol blending reduces crude oil dependency and lowers CO₂ emissions, contributing to environmental sustainability.
Anti-Ethanol Blending
The environmental benefits are outweighed by the economic inefficiencies and higher operational costs.
- Ethanol Procurement (2025-26)
- 705.43 crore litres
- Ethanol Procurement Value (2025-26)
- Rs 49,577 crore
- Average Ethanol Price (2025-26)
- Rs 70.2 per litre
- Average Crude Oil Cost (FY27)
- Rs 57.42 per litre
- Refinery-Gate Petrol Cost
- Rs 53 per litre
- Foreign Exchange Savings (2014-15 to Present)
- Rs 1.97 lakh crore
- CO₂ Emissions Avoided
- 952 lakh tonnes
- Additional Farmer Income
- Rs 1.66 lakh crore