New Delhi : The introduction of the first E85 fuel pump in Delhi marks the beginning of a new chapter in India’s ethanol journey. At first glance, that price difference appears attractive. But if Brazil’s decades-long ethanol experiment teaches anything, it is that success depends on far more than a lower price displayed on the fuel pump.
Over several decades, the country built an entire ecosystem around ethanol, using sugarcane as the primary feedstock and encouraging the development of flex-fuel vehicles capable of running on petrol, ethanol, or any blend in between. Today, most new cars sold in Brazil are flex-fuel vehicles, allowing motorists to choose their fuel based on economics rather than availability.
Brazilian motorists have long followed what is known as the “70 per cent rule”. Because ethanol contains less energy than petrol, vehicles typically travel fewer kilometres on a litre of ethanol than they do on a litre of petrol. As a result, ethanol only becomes economically attractive when its price is roughly 70 percent or less of the price of petrol. At current Delhi prices, E85 at Rs 82.12 per litre is about 80 per cent of the price of E20 petrol.
Brazil’s experience suggests that consumers embrace ethanol when it is priced 30-35 per cent below petrol. However, when the discount narrows to around 20-25 per cent, the economics become less compelling as ethanol’s lower energy content begins to offset much of the savings. If petrol costs around Rs 100 per litre, the Brazilian rule of thumb would imply an ethanol price closer to Rs 70 per litre than Rs 82 per litre.
The government aims to establish around 5,000 ethanol dispensing stations by 2027, but infrastructure remains sparse and flex-fuel vehicle volumes are negligible. That creates a classic chicken-and-egg problem. Automakers will be reluctant to launch large numbers of flex-fuel vehicles without a nationwide fuel network, while fuel retailers are hesitant to invest heavily in dispensing infrastructure without a sizeable vehicle parc to serve.
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