Why E20 fuel has caused angst on the Indian auto market
The launch of E20 by the Indian government under Prime Minister Narendra Modi has created confusion and panic in the third largest auto market.
Find out more about E20, its effects and facts:
How was E20 implemented? How does it help?
E20 is petrol blended 20% with ethanol. This alcohol is primarily produced from sugarcane, maize and other grains. The fuel was first introduced in April 2023 at a handful of pumps and is now available across India. It replaces the 10% ethanol, known as E10, which most cars were designed to run on.
Recent weeks have seen older fuel blends such as E10 and E5 disappear, leaving the consumer with no other choice than to purchase E20.
India claims that E20 will reduce oil imports and save $5 billion this year in foreign currency. It will also add $4.6 billion to farmer's incomes.
Fuel is also less polluting.
Why are Indians angry?
Brazil and the United States, among others, are major markets for ethanol-blended gasolines. These nations, unlike India, offer a variety of fuel blends to their consumers.
Indian motorists are worried that there is no alternative fuel at 90,000 petrol pumps in the country, and E20 could affect their older cars and motorbikes. There are many car manuals that only allow E5 or E10 to be used. This adds confusion, even though an industry group and not the automakers themselves had stated that warranties and insurance claims will be honored.
What do the Government and Industry say?
The government claims that the fears are unfounded, and E20 will be the only solution. The government claims that older vehicles will need some rubber gaskets and parts replaced.
The auto industry has generally supported the government. The government said that according to laboratory tests, fuel economy drops by 2 to 4% when using E20. This is higher in real-world conditions and with older vehicles. However, it called E20 safe.
This is a radical departure from the long-standing industry position on E20.
The Society of Indian Automobile Manufacturers has stated that the government will have to provide E10 along with E20 in 2020 to ensure "safe operation" of older vehicles. They also said that replacing parts on older vehicles was a "mammoth job".
Who does it help?
Sugar mills in India, such as Bajaj Hindusthan Sugar and Balrampur Chini Mills, and ethanol producers, like Praj Industries, CIAN Agro, benefit from a higher demand for sugar, just like ethanol.
Reduced crude imports benefit state-run oil companies such as Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corp. (Reporting and editing by Aditi Kalra, Adityi Shah)
(source: Reuters)
