Higher ethanol blended petrol between 22-30% exempted from central excise duty

The Department of Revenue (Ministry of Finance) issued a notification on June 11, 2026, exempting E22, E25, E27, and E30 petrol blends from Central Excise Du...

What Happened

The Department of Revenue (Ministry of Finance) issued a notification on June 11, 2026, exempting E22, E25, E27, and E30 petrol blends from Central Excise Duty in its entirety — including Basic Excise Duty, Special Additional Excise Duty, Road and Infrastructure Cess, and Agriculture Infrastructure and Development Cess.
The four new blend grades are defined as: E22 (78% motor spirit + 22% ethanol), E25 (75% + 25%), E27 (73% + 27%), and E30 (70% + 30%).
The exemption is subject to compliance with BIS standard IS 19850:2026, which was notified by the Bureau of Indian Standards on May 15, 2026, setting quality and safety parameters for E22–E30 blends.
The move is intended to create a commercially viable supply chain for higher ethanol blends, building on India's achievement of 20% blending across the national petrol pool by early 2026.
Oil Marketing Companies (OMCs) and private blenders are the primary beneficiaries, as the exemption reduces their input cost for producing higher-blend petrol grades.

Static Topic Bridges

Excise Duty Structure on Petrol in India

Petrol and diesel are constitutionally excluded from the Goods and Services Tax (GST) framework. Under Article 279A of the Constitution (inserted by the 101st Constitutional Amendment Act, 2016), the GST Council has the power to recommend inclusion of petroleum products in GST, but no recommendation has been made. Until then, petrol remains taxed under Central Excise duty (Centre) and Value Added Tax/Sales Tax (states), making it a dual-levy commodity.

101st Constitutional Amendment Act, 2016: inserted Articles 246A, 269A, and 279A, establishing the GST framework.
Article 279A(5): allows GST Council to recommend inclusion of petroleum crude, high-speed diesel, motor spirit, natural gas, and aviation turbine fuel under GST.
Central levies on petrol comprise: Basic Excise Duty, Special Additional Excise Duty (SAED), Road and Infrastructure Cess, and Agriculture Infrastructure and Development Cess (AIDC).
The excise exemption on E22–E30 is granted under Section 5A of the Central Excise Act, 1944 — the standard power to issue conditional duty-exemption notifications.

Connection to this news: Because petrol remains outside GST, the Central Government can use targeted excise exemptions as a granular policy tool — specifically waiving duty on higher-blend variants without affecting the standard petrol tax regime.

National Biofuel Policy 2018 and the EBP Programme

The Ethanol Blended Petrol (EBP) Programme operates under the National Policy on Biofuels, 2018 (amended 2022). It mandates Oil Marketing Companies to blend ethanol into petrol sold at retail outlets. The 2022 amendment was a significant revision: it advanced the E20 blending target to Ethanol Supply Year (ESY) 2025-26 (from the original 2030 target) and opened scope for policy support for blends beyond 20%.

Nodal ministry: Ministry of Petroleum and Natural Gas.
E20 achieved: by early 2026, making India the first major economy to meet a 20% biofuel blending target in the transport sector at national scale [Unverified — comparative claim].
Permissible ethanol feedstocks expanded progressively: from only C-heavy molasses (2018) to B-heavy molasses, sugarcane juice, damaged food grains (maize, rice), and 2G (agricultural residue-based) ethanol.
GST on ethanol reduced from 18% to 5% as an earlier fiscal support measure.
As of April 2026, all petrol sold in India must contain a minimum 20% ethanol and meet a Research Octane Number (RON) of at least 95.

Connection to this news: The excise exemption on E22–E30 is the next step in the graduated fiscal roadmap, providing a tax incentive for OMCs to invest in the blending infrastructure needed to commercially supply grades above the now-standard E20.

Bureau of Indian Standards (BIS) and Fuel Specification Standards

The Bureau of Indian Standards Act, 2016 (replacing the BIS Act, 1986) established BIS as the national standards body of India under the Ministry of Consumer Affairs, Food and Public Distribution. BIS formulates Indian Standards (IS) for products, processes, and systems. Fuel quality standards such as IS 19850:2026 are critical because they set minimum safety, combustibility, and emissions-compatibility requirements for new fuel grades — without which vehicles, engines, and distribution infrastructure cannot be certified for use.

BIS established under BIS Act, 2016 (replaced BIS Act, 1986); headquarters: New Delhi.
IS 19850:2026: notified May 15, 2026; sets quality parameters (RON, vapour pressure, density, ethanol content, water tolerance) for E22–E30 blends.
The Central Excise exemption is conditional on IS 19850:2026 compliance — ensuring only quality-certified higher-blend fuel attracts the duty-free treatment.
Separately, BIS standard IS 17021 governs E20 fuel; IS 15464 governs E10; this graduated standardisation mirrors the graduated blending timeline.

Connection to this news: The conditional link between the BIS IS 19850:2026 standard and the excise exemption ensures the fiscal benefit acts as a quality enforcement tool — only specification-compliant blends qualify, protecting consumers and vehicle OEMs.

Sugar Sector Linkage and Agricultural Income Support

India's ethanol production is predominantly derived from the sugar sector — sugarcane juice, B-heavy molasses, and C-heavy molasses account for the majority of ethanol supply. Ethanol procurement by OMCs at government-notified prices functions as an effective support mechanism for sugar mills and, by extension, cane farmers, particularly in surplus production years when open market sugar prices are depressed.

Ethanol procurement price for C-heavy molasses-based ethanol: ₹57.61/litre (ESY 2024-25); sugarcane juice/B-heavy: ₹65.61/litre [Unverified — exact figures; subject to annual revision by Cabinet].
Sugar surplus and lower prices depress mills' ability to pay Sugarcane Arrears (the price owed to farmers for cane); ethanol diversion reduces surplus and improves liquidity.
The Commission for Agricultural Costs and Prices (CACP) factors ethanol revenue potential into its Fair and Remunerative Price (FRP) recommendations for sugarcane.
Top ethanol-producing states: Uttar Pradesh, Maharashtra, Karnataka.

Connection to this news: Higher blend mandates (E22–E30) require proportionally more ethanol per litre of petrol sold, translating directly into larger procurement orders for sugar mills and grain-based distilleries, supporting farm incomes beyond the sugar price mechanism.

Key Facts & Data

Notification date: June 11, 2026; statutory basis: Section 5A, Central Excise Act, 1944.
Duties exempted: Basic Excise Duty + SAED + Road and Infrastructure Cess + Agriculture Infrastructure and Development Cess.
BIS IS 19850:2026 (notified May 15, 2026): compliance mandatory to claim the exemption.
Blends covered: E22, E25, E27, E30.
Petrol and diesel are outside GST — constitutional basis: Article 279A (101st Amendment, 2016).
India's E20 target (National Biofuel Policy 2018, amended 2022): achieved by early 2026, five years ahead of original 2030 deadline.
GST on ethanol: reduced from 18% to 5% (earlier measure).
India's annual petrol consumption: approximately 35–38 million metric tonnes [Unverified — approximate, subject to revision].
Petroleum products tax share: central excise on petrol has been one of the top three revenue earners for the Centre in select years.