India’s flex-fuel vehicle rollout plan faces a chicken-and-egg hurdle

The demand uncertainty for flex-fuel vehicles poses a real storage problem for flex fuels. High ethanol blends, if left sitting too long in storage, can absorb moisture and potentially damage or corrode engines, said the first of the three persons cited above, who is an oil marketing company executive.

“They (stocks of fuel with high ethanol blends) have to be kept rolling, otherwise the ethanol picks up moisture and turns hygroscopic,” this person added.

For automakers, however, certainty on the supply of flex fuels across the country is essential to build demand for flex-fuel vehicles, which will also compete with vehicles operating on other fuels. “There is no clarity yet on whether flex fuels will be available, and if there is no fuel available, it impacts demand,” said the second person cited above, who is an auto industry executive.

"Protoypes of flex fuel-vehicles have been ready for some time now, but launches and sales rely on availability of the fuel, especially since these vehicles will be more expensive than regular petrol vehicles," said the third person.

“The question then is: will vehicles come first or will fuel supply come first? This is a chicken-and-egg problem. And both have to work together on this. We cannot say how many vehicles will come in a certain area in a certain amount of time for these services. We cannot put pressure on common citizens, but we can liaison with service providers,” the first person cited earlier said.

Queries sent to the ministries of petroleum and natural gas, heavy industries, and road transport, as well as state-run oil marketing companies Indian Oil Corporation Ltd (IOCL), Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd (BPCL), auto industry body The Society of Indian Automobile Manufacturers (SIAM) and major automakers on 12 May did not elicit a response till press time.

Subudhi also said that lessons from economies like Brazil can be useful in creating a plan for the rollout of flex-fuel vehicles.

Flex-fuel vehicles are widely used in Brazil, where they were introduced in 2003. They now account for more than 90% of new vehicle sales, with cars and two-wheelers able to run on ethanol, petrol, or any blend of the two, backed by a robust sugarcane-based ethanol ecosystem.

The country’s push for high ethanol blends in petrol comes at a time when the government is looking to reduce India’s near-90% dependence on imported crude oil, with prime minister Narendra Modi on 10 May calling for citizens to adopt electric vehicles amid the global energy crisis fuelled by the West Asia war.

Crude oil prices have risen from about $65-70 per barrel to over $100 per barrel since the conflict began on 28 February, putting pressure on the import bills of multiple economies, including India, the world’s third-largest energy consumer.

To be sure, oil imports have decreased year on year. In FY26, India imported crude oil worth $123 billion, down from $137 billion the previous year.

The demand for flex-fuel vehicles will not be generated until consumers know that high ethanol blends, for which they have paid a premium in the vehicle's purchase price, are readily available, according to Ashim Sharma, senior partner and business unit head at Nomura Research Institute (NRI) Consulting and Solutions, India. “Purchase incentives on both flex fuel vehicles and their fuel could generate demand for both,” he said.

According to ethanol makers, they have produced approximately 20 billion litres of the compound, but demand from the government's 20% blending mandate has only generated orders for about 11 billion litres. Several ethanol plants are operating at suboptimal levels, industry lobby group All India Distillers’ Association (Aida) said in a letter to the ministry of petroleum and natural gas on 3 March, only days after war broke out, Mint reported earlier.

The transition to higher ethanol blends is no longer a technical experiment but a national economic priority, Aida president Vijendra Singh said on Wednesday.

"India has made significant strides in ethanol blending, and the next phase will require parallel development of the flex fuel mobility ecosystem. For large-scale adoption of flex fuel vehicles, it is important that fuel availability, storage infrastructure, and vehicle readiness and conducive policy support progress in a coordinated manner. Higher ethanol blends such as E85 and E100 will require dedicated handling and distribution infrastructure, and timely expansion in this area will help provide greater confidence to automakers and consumers alike," he told Mint.

Oil minister Hardeep Singh Puri in January this year said that India’s E20 blending led to foreign exchange savings of around $19.3 billion in the ethanol supply year 2025, which runs from November of one year to October of the next.