Anticipated Savings of $4.9 Billion in Foreign Exchange Due to Adoption of E20 Fuel in FY26, Predicts Oil Ministry
In a recent announcement, the Ministry of Petroleum & Natural Gas (MoPNG) has projected savings of around $4.9 billion (approximately Rs 43,000 crore) in foreign exchange during the current financial year (FY26) due to the use of E20 fuel.
This anticipated saving is primarily attributed to the blending of 20% ethanol with petrol in E20 fuel, which reduces the dependence on imported crude oil. By substituting a substantial portion of petrol demand with domestically produced ethanol, the volume of oil imports is decreased, resulting in savings on foreign currency outflow.
The key factors contributing to this savings include:
- Reduction in crude oil imports: The use of E20 fuel substitutes approximately 20% of petrol volume with domestically produced ethanol, resulting in a significant decrease in crude oil import requirements. Given that India imports a large portion of its crude oil, this reduction leads to substantial foreign exchange savings.
- Support to domestic ethanol production: Ethanol is produced from sugarcane and maize in India. By increasing ethanol blending, there is a steady demand created, leading to payments to farmers estimated to be Rs 40,000 crore this year. This promotes rural incomes and reduces external dependency.
- Energy security and environmental benefits: Beyond forex savings, E20 fuel cuts CO2 emissions by around 30% compared to E10 fuel, contributing to India’s Net Zero 2070 goal and reducing pollution.
- Long-term cost savings: Over the past decade, ethanol blending has saved over Rs 1.44 lakh crore in foreign exchange by substituting nearly 245 lakh metric tonnes of crude oil.
In essence, the MoPNG’s forecasted $4.9 billion savings come from replacing imported petrol with domestically-produced ethanol in E20 fuel, which in turn reduces oil import bills, supports farmers, and contributes to environmental goals.
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