Centre Issues Concern over Ethanol Levies by State Governments

(Team Asianet Newsable/MSN) Serious concerns have been raised by the Government of India regarding the imposition of additional levies on ethanol by the states of Punjab, Haryana, and Himachal Pradesh. The Union Ministry of Petroleum and Natural Gas has urged these states to reconsider recent policy changes that could hamper the country’s ethanol blending programme, increase fuel prices, and undermine environmental sustainability goals.

Incidentally, all three states have governments of different parties - Himachal Pradesh is ruled by the Congress government, Punjab has AAP in power and Haryana has a BJP government. It is Haryana which is of particular interest, as it was expected to follow the vision of the central government. However, the Haryana government decided to pursue an independent policy in raising the levies on ethanol.

It is in light of this that the Ministry has written to all three states. The letters were addressed individually by Mr Parveen M Khanooja, Additional Secretary in the Union Ministry of Petroleum and Natural Gas. The letter to Himachal Pradesh Chief Secretary Prabodh Saxena was sent on March 27, followed by a letter to Punjab Chief Secretary KAP Sinha on April 8, and another to Haryana Chief Secretary Anurag Rastogi on May 23.

In these letters, the Ministry highlighted that the new fees—such as regulatory charges on ethanol permits, increased licence and renewal fees for distilleries, and import duties—could disrupt the free movement of ethanol within and outside the states. These additional costs are expected to raise the price of ethanol-blended petrol, potentially slowing the national effort to increase blending levels.

The Ministry noted that such charges, when applied to a product already subject to GST, may also raise legal and policy concerns. The ethanol blending initiative is a key national mission aimed at reducing carbon emissions, cutting dependence on imported fuels, and supporting the rural economy by providing a market for agricultural produce.

The Centre has called for the withdrawal or revision of the new levies to ensure continued momentum towards achieving the national target of 20% ethanol blending by 2025–26 and 30% by 2030. The government reiterated its commitment to working with states to align policies with national energy goals, promote cleaner fuels, and support the circular economy. READ MORE

The State of Uttar Pradesh levies export fees of Rs. 1 per BL on denatured alcohol

While responding to a query on measures taken by the Government to align State policies with national energy goals, promote cleaner fuels, and support the circular economy, he (The Minister) said: “The National Policy on Biofuels lays out the roles and responsibilities of all the stakeholders including Ministries/Departments/States with respect to biofuels to synergise efforts. It also provides an institutional mechanism for overall coordination, effective end-to-end implementation and monitoring of biofuel programmes. Additionally, NITI Aayog has launched the ASSET (Accelerating Sustainable State Energy Transition) platform in collaboration with Ministry of New and Renewable Energy and Ministry of Power to co-create clean energy transition blueprint and implementation roadmaps, focussing on emerging technologies, circular economy principles, and sectoral decarbonisation strategies at the State level.”

The National Policy on Biofuels 2018, as amended in 2022, inter-alia advanced the target of 20% blending of Ethanol in petrol from 2030 to Ethanol Supply Year (ESY) 2025-26

The Government has been promoting blending of ethanol in petrol under the Ethanol Blended Petrol (EBP) Programme wherein Public Sector Oil Marketing Companies (OMCs) sell ethanol blended with petrol. During the ongoing ESY 2024–25, OMCs have achieved an average ethanol blending of 19.05% as on 31.07.2025. In the month of July 2025, Ethanol blending of 19.93% has been achieved.

In order to ensure availability of feedstock for ethanol production to achieve 20% Ethanol blending target by the Ethanol Supply Year (ESY) 2025-26, the Government have taken several steps which inter-alia includes:

-Expansion of feedstock for Ethanol production as per the National Policy on Biofuels, as amended in 2022.

-Development of Maize Cluster around ethanol plants by Department of Agriculture and Farmers Welfare (DAFW) and a Project by ICAR-Indian Institute of Maize Research (IIMR) titled “Enhancement of maize production in catchment areas of ethanol industries” to increase the production of maize in catchment area of grain-based distilleries.

-Approval by Government for allocation of 52 Lakh Metric Tonne (LMT) of surplus Food Corporation of India (FCI) rice for ethanol production, each for the -ESY 2024-25 (from 1st November 2024 to 31st October 2025) and ESY 2025-26 up to 30th June 2026.

-Diversion of 40 LMT of sugar for ethanol production allowed for the ESY 2024-25.

Further, to boost ethanol production as well as supply in the country, Government introduced administered price mechanism for Ethanol procurement under the Ethanol Blended Petrol (EBP) Programme, lowered GST rate to 5% for Ethanol for EBP Programme, introduced various Ethanol Interest Subvention Schemes (EISS) during 2018-22 for Ethanol production from molasses as well as grains, a dedicated subvention scheme for Cooperative Sugar Mills to convert existing sugarcane-based distilleries into multi-feedstock plants for ethanol production has been notified by the Government on 06th March, 2025, Long Term Offtake Agreements (LTOAs) between OMCs and Dedicated Ethanol Plants, notified the “Pradhan Mantri JI-VAN (Jaiv Indhan – Vatavaran Anukool fasal awashesh Nivaran) Yojana”, to provide financial assistance for setting up Advanced Biofuels projects in the country using lignocellulosic biomass and other renewable feedstock, multimodal transportation of Ethanol to enhance availability of ethanol and increasing ethanol storage capacity along with other allied infrastructure for handling of higher blends of ethanol. READ MORE