India is considering making flex-fuel engines mandatory for automakers, according to remarks made by a government minister.

Local media reports have cited Union minister Nitin Gadkari saying that a decision to confirm the move will be taken within ten days. He said the move – which would see cheaper bio-ethanol supplied for automotive use – would help farmers and boost the Indian economy.

Bakar Sadik Agwan, Senior Automotive Consulting Analyst at GlobalData, a leading data and analytics company, said the latest development comes two weeks after the government brought forward the cut-off date for 20% ethanol blending petrol program (E20) from 2030 to 2025. The production mandate for ‘all flex-fuels vehicles’, if implemented, will be a major milestone in the Indian automotive sector but it will have its own sets of benefits and challenges.

“The government’s swift attention to biofuels is a result of the increasing economic burden attributable to high crude-based fuel prices recently,” Agwan says. “India has a surplus of feedstock required for ethanol production, ensuring adequate supply for fuel production. Increase in ethanol blending can help the government to reduce oil imports, reduce carbon emission and curb fuel prices.”

Agwan notes that there has been a push by the government in the past to increase ethanol blending in petrol for cost and environmental benefits. The National Policy on Biofuels, approved in 2018, aims at blending 10% ethanol in petrol by 2022 and 20% by 2025. Presently, about 8.5% of ethanol is mixed with petrol.

“However, the present announcement outlines the government’s intent to go for ‘flex-fuel’ vehicles for using high-level blend of ethanol in the fuel,” he notes and points out that there are product supply implications. “While flex-fuel will have its own set of benefits, it will not be compatible with the regular petrol engines in India and would require significant production changes.

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“Presently, petrol-powered vehicles constitute over 76% of the total passenger vehicle sales in India. While making these vehicles compatible with E10 and E20 seems practical, shifting to flex-fuel engines with such big volumes would be a challenge. This would require significant investments in terms technology, research, time and capital. It would also be an additional burden for Indian automakers who recently made heavy investments into BSVI transition, are struggling with production-sales disruptions due to COVID-19 and have been investing to achieve government’s ambition for electrification.

“Additionally, there is also a sales upsurge of CNG passenger vehicles in India as an alternative to costlier BSVI petrol engine vehicles. The government is also pushing for addition of 10,000 fuel pumps by 2030 to promote CNG as an alternative fuel.

“The multi-directional & parallel focus of the government to promote alternative fuels can cause various levels of operational challenges for the automakers. The government will need to think it over thoroughly and a do a robust planning for adequate flex-fuel supply and policies that are flexible and acts in favour of the present automakers.”