New Delhi: India’s automakers have told the government that consumers are unlikely to adopt flex-fuel vehicles unless high-ethanol fuels such as E85 and E100 are priced significantly below , according to two people aware of discussions between the petroleum ministry, oil marketing companies, and auto lobby group Society of Indian Automobile Manufacturers (Siam).
The industry has sought lower retail pricing for high-ethanol fuels along with tax benefits as the government accelerates work on a roadmap for higher ethanol blending amid rising energy security concerns.
In Brazil, where most vehicles can run on E85 or E100 fuels, high-ethanol blends are priced lower than the standard E27, according to the country’s national agency of petroleum, natural gas, and biofuels. E85 and E100 fuels require dedicated flex-fuel-compatible engines, unlike E20 petrol currently used in regular vehicles in India.
“The incentives sought include a reduction in the GST (goods and services tax) rate on flex-fuel vehicles as well as some benefit for consumers on opting to use high ethanol blends,” one of the people cited above said on condition of anonymity.
Currently, flex-fuel vehicles—even though there are none available commercially in India as of today—are taxed at the same rates as conventional internal combustion engine vehicles, ranging from 18% for smaller cars to as high as 40% for larger models.
However, according to the second person, the proposal for GST rationalization has so far been limited to two-wheelers, since lowering taxes on cars would place flex-fuel vehicles closer to electric vehicles, which attract 5% GST.
A spokesperson for Hero MotoCorp said the company is actively developing flex-fuel vehicles, and some form of demand-side support and incentives would be important during the initial scale-up phase to drive consumer adoption in the price-sensitive two-wheeler segment.
“Policy measures that help offset the higher upfront technology costs for OEMs (original equipment manufacturers) and improve consumer affordability like lower pricing for E85 can accelerate the adoption of alternative fuel vehicles in the country,” the spokesperson said.
According to the second person cited above, lowering prices of E85 and E100 fuels is critical to attract customers, who would otherwise opt for lower ethanol blends such as E20 because of their higher energy content.
Since ethanol contains less energy per litre than petrol, vehicles running on higher ethanol blends typically deliver lower fuel economy.
Queries emailed to the ministries of petroleum and natural gas and finance, the GST secretariat, IOC, HPCL, BPCL, Siam, Maruti Suzuki, Toyota Kirloskar Motor, Tata Motors, Mahindra & Mahindra, Honda Motorcycle and Scooter India (HMSI), and Bajaj Auto on 18 May remained unanswered till press time.
Why the urgency?
The push for flex-fuel vehicles has gathered pace as India looks to reduce dependence on imported crude oil. The country imports nearly 90% of its crude oil requirements valued at more than $120 billion annually, with a significant share sourced from West Asia.
The focus on petrol blending is because roughly 95-98% of India’s petrol demand comes from vehicles, while for diesel it is about 65-70%, with the rest used in agriculture, industry, railways, and power generation. In FY26, India consumed 42.58 million tonnes of petrol and 94.70 million tonnes of diesel in FY26, PPAC data showed.
As part of the transition to higher ethanol blends, the Bureau of Indian Standards (BIS) on 18 May including E22, E25, E27 and E30, creating a fresh specification category beyond the current E20 fuel.
The norms, effective from 15 May 2026, lay down technical requirements for higher ethanol blends including octane levels, sulphur limits, vapour pressure, corrosion resistance and fuel stability to ensure compatibility with vehicle engines and fuel systems.
R.C. Bhargava, chairman of Maruti Suzuki India Ltd, the largest automobile manufacturer in India, said the company has the capability to comply with the new standards. “If the government decides to implement it and it becomes a standard requirement for everybody, we will comply,” Bhargava said.
Maruti Suzuki has announced prototypes of flex-fuel cars, as have Toyota and Tata Motors. Bajaj Auto, HMSI, and Hero MotoCorp have announced prototypes of flex-fuel two-wheelers.
Necessary roadmap
On their part, ethanol makers have also been lobbying for higher ethanol blends with supportive taxation measures, wider fuel availability, and competitive fuel pricing to unlock large-scale adoption.
According to C.K. Jain, president of the Grain Ethanol Manufacturers Association, affordability has to be at the centre of policy design for large-scale consumer acceptance of flex fuels.
“The Indian two-wheeler market is highly price sensitive, and purchase decisions are largely driven by upfront vehicle costs. Lower acquisition costs can play a decisive role in faster adoption of flex-fuel vehicles,” Jain said.
Kirit Parikh, former member (energy) of the erstwhile Planning Commission, said ethanol blending is a viable alternative in light of the ongoing energy security concerns surrounding the West Asia war.
“However, one must also consider that making ethanol is highly water-intensive if it is made from sugarcane. Also, making ethanol from maize could create land-use issues,” Parikh said, adding that second-generation ethanol could also be made from agricultural waste.
India produced about 20 billion litres of ethanol as of March 2026, data from All India Distillers’ Association showed, against demand of about 11 billion litres under the current 20% blending mandate, leaving manufacturers grappling with under-utilization of capacity.
While ethanol can help reduce India’s , flex-fuel adoption will require a diversified approach, said auto industry veteran Arun Malhotra. He added that rolling out flex-fuel vehicles would be a gradual process involving alignment across automakers, fuel retailers, policymakers and consumers.