Lower fuel and vehicle costs key to driving ethanol demand: Experts

New Delhi: Govt will have to look at not only reducing price of high-ethanol blended petrol and pure ethanol, but also the cost of flex fuel vehicles (FFVs), which would be using the fuel, to create a high demand among consumers, experts said, acknowledging that current 20% blending has helped save India approximately 4.5 crore barrels of imported crude oil annually.

Govt on Friday announced Rs 82.12 per litre as the retail price of 85% ethanol-blended petrol (E85) in Delhi compared to the price of Rs 102.12 of the current 20% blended fuel. This week two major automobile companies launched two flex fuel bikes and a car, a move being seen as an effort to reduce India’s dependence on import of crude oil.

Officials involved in preparing the roadmap for FFVs and higher use of ethanol said that use of 85-100% ethanol as fuel can reduce vehicle mileage up to 30%. “So, you can’t expect customers to opt for these vehicles unless the price of high-ethanol blend isn’t reduced proportionately to compensate for less mileage. Second, the price of FFVs will be higher than petrol vehicles as manufacturers make them both fuel and material compliant, and these have more sensors. This also needs to be addressed,” said one of them.

Last year, petroleum minister Hardeep Singh Puri had written to finance minister Nirmala Sitharaman seeking GST parity of FFVs with electric vehicles. Currently, the GST for FFVs is 28% compared to only 5% for EVs.

Even at a meeting called by the petroleum ministry in March last week, vehicle manufacturers had flagged the need to address consumer concerns, particularly regarding the need to lower fuel costs and tax incentive to make FFVs affordable. Officials had informed the industry that they had taken up reduction in GST rate on FFVs and ethanol as fuel with the finance ministry.