New draft rules soon on 'E85 & more' vehicles as government pushes ethanol shift

The central government is preparing to issue a fresh draft notification expanding vehicle test requirements from E85 to "E85 or more" (including up to E100),...

What Happened

The central government is preparing to issue a fresh draft notification expanding vehicle test requirements from E85 to "E85 or more" (including up to E100), enabling manufacturers to produce Flex-Fuel Vehicles (FFVs) for the Indian market.
A prior draft notification (June 27, 2025) had lapsed without being finalised — derailed partly by controversy over FFV fuel efficiency losses (approximately 27–30% lower mileage on ethanol vs. petrol) and manufacturer concerns about GST disparity (FFVs taxed at 28% vs. 5% for EVs).
The West Asia crisis, which has made fuel import dependence a strategic vulnerability, has renewed political and policy urgency around alternative fuel vehicles.

Static Topic Bridges

Flex-Fuel Vehicles (FFVs) and Ethanol Fuel Blends

A Flex-Fuel Vehicle (FFV) is one whose internal combustion engine is designed to run on any blend of petrol and ethanol — from conventional E5/E10 up to E85 or E100. The engine management system automatically detects and adjusts to the fuel mixture in use. FFVs are distinct from Dedicated Ethanol Vehicles (which run only on high-ethanol blends) and from conventional petrol or diesel vehicles retrofitted to accept higher blends.

E85 refers to a fuel blend of approximately 85% ethanol and 15% petrol; E100 is pure ethanol (used in Brazil's sugarcane ethanol vehicles)
Ethanol has an energy density of ~21.2 MJ/litre vs. petrol's ~32 MJ/litre — this causes the 27–30% mileage reduction on high-ethanol blends
FFV engines typically use higher-compression designs and ethanol-compatible fuel lines, seals, and injectors
In December 2022, the Ministry of Road Transport and Highways (MoRTH) notified test requirements for E5–E85 blends; the proposed new notification extends this to E100

Connection to this news: The proposed "E85 or more" notification is the regulatory gateway for commercial FFV production in India. Without it, automakers cannot certify E100-capable engines under Indian type-approval rules.

India's Ethanol Blending Programme (EBP)

The Ethanol Blending Programme (EBP) is India's flagship biofuel initiative, mandating that oil marketing companies (OMCs) blend ethanol with petrol for sale at retail pumps. The programme is administered by the Ministry of Petroleum and Natural Gas and the National Biofuel Coordination Committee.

India achieved ~15% average ethanol blending in petrol in the 2023–24 Ethanol Supply Year (ESY), up from just ~1.5% a decade ago
The EBP target is 20% blending (E20) by ESY 2025–26, advanced from 2030 under the revised National Biofuel Policy (2022 amendment)
Ethanol for blending comes primarily from 1G sources (sugarcane molasses and juice) and increasingly from 2G sources (cellulosic biomass)
OMCs — Indian Oil, BPCL, HPCL — procure ethanol directly from distilleries at government-fixed prices
The programme has reduced India's petrol import bill by thousands of crores annually

Connection to this news: FFVs represent the next step beyond E20 blending: while E20-compatible vehicles (already mandated for new vehicles) accept up to 20% ethanol, FFVs can use blends all the way to E100, enabling far greater ethanol offtake from India's domestic distillery sector.

National Biofuel Policy 2018 and the 2G Ethanol Ecosystem

The National Biofuel Policy 2018 provides the enabling framework for India's biofuel ambitions across generations. It distinguishes between 1G biofuels (from food-based feedstocks like sugarcane molasses), 2G biofuels (from lignocellulosic biomass like bagasse and agricultural residue), and advanced biofuels (algae, waste-to-energy, etc.).

India has set up dedicated 2G ethanol plants with government support: IOC's Panipat plant (100 KLPD), HPCL's Bathinda plant — these use agricultural residue as feedstock
2G ethanol avoids the food-vs-fuel dilemma by using crop waste rather than grain or cane juice
The Pradhan Mantri JI-VAN Yojana provides financial support to 2G ethanol projects
India aims to reduce foreign exchange outgo on oil imports through higher domestic fuel use; the EBP already saved an estimated ₹35,000+ crore in FY24

Connection to this news: FFVs running on E85 or E100 would create a much larger market for domestically produced ethanol — from both 1G (sugar sector) and 2G (agricultural residue) sources — accelerating the strategic shift away from imported fossil fuels.

GST and Policy Incentive Gaps for FFVs

A key industry concern delaying FFV adoption is the taxation disparity. Currently, FFVs attract 28% GST (the highest slab, applicable to conventional petrol and diesel vehicles above a certain engine size), while Battery Electric Vehicles (BEVs) attract only 5% GST. This differential makes FFVs commercially uncompetitive against both conventional and electric alternatives.

Correspondence has been sent from the Ministry of Petroleum and Natural Gas to the Ministry of Finance seeking GST parity between FFVs and EVs
Industry has also flagged the need for a dedicated FFV fuel retail network, consumer incentives (purchase subsidies or tax breaks), and compensation for the mileage deficit relative to petrol
Brazil is the global leader in FFV adoption — its Flex programme (launched 2003) now covers ~90% of new vehicle sales, powered by its large domestic sugarcane ethanol industry
In India, all major OEMs have developed FFV prototypes but commercial production is pending regulatory clarity and consumer incentive structures

Connection to this news: The new draft notification is a necessary but not sufficient step — industry has made clear that regulatory enablement (the test rules) alone will not drive FFV adoption without concurrent GST reform, fuel infrastructure deployment, and consumer-facing incentives.

Key Facts & Data

E85 composition: approximately 85% ethanol + 15% petrol
Mileage loss on high-ethanol blends (E85/E100) vs. petrol: ~27–30%
India's ethanol blending achievement (2023–24 ESY): ~15%
India's EBP target: 20% blending (E20) by ESY 2025–26
GST on FFVs: 28% (vs. 5% for Battery EVs)
Original MoRTH notification for E5–E85 test requirements: December 2022
Draft notification for "E85 or more" extension: June 27, 2025 (lapsed)
Brazil FFV market share: ~90% of new vehicle sales
2G ethanol plants in India: IOC Panipat (100 KLPD), HPCL Bathinda
Pradhan Mantri JI-VAN Yojana: government scheme supporting 2G ethanol commercial projects