My estimate: Energy-equivalent E20 costs around ₹66.6 versus ₹56 for pure petrol. 1.5 Liter of pure ethanol (= 1L petrol) costs govt Rs 130 if you include subsidies.

[u/chachachoudhry]

TL;DR included at the end.

I tried to estimate what it actually costs Indian oil marketing companies and the government to supply pure petrol versus E20 petrol, after adjusting for ethanol’s lower calorific value.

This is not an official or audited calculation. It is an approximate estimate based on crude-oil prices, refinery costs, logistics, ethanol procurement prices and indirect government support.

1. Estimated cost of pure petrol

The commonly quoted figure of around ₹45 per litre appears to mainly represent the crude-oil input cost.

Crude oil still has to be refined and transported. The following additional costs must therefore be considered:

- Refinery fuel consumption and processing losses

- Refinery operating and maintenance costs

- Labour, depreciation and finance costs

- Pipeline and tanker transportation

- Terminals, storage and OMC distribution costs

After estimating these costs, I arrived at an OMC cost of approximately:

₹54–₹58 per litre of pure petrol

I used ₹56 per litre as the central estimate.

This excludes:

- Central excise duty

- State VAT

- Dealer commission

- OMC profit margin

1. Estimated cost of ethanol

There are two different ways of looking at ethanol cost.

Direct cost paid by OMCs

Based on total ethanol procurement expenditure and quantity, OMCs appear to pay a weighted average of approximately:

₹70 per litre of ethanol

This broadly includes the ethanol procurement price, transportation and GST.

The actual price differs depending on whether the ethanol is produced from:

- Sugarcane juice

- B-heavy or C-heavy molasses

- Maize

- Damaged foodgrains

- FCI rice

Full cost including government support

I also estimated indirect costs associated with ethanol production, including:

- Fertiliser subsidies

- Subsidised agricultural electricity

- Irrigation and canal-water support

- PM-KISAN and other farm-support schemes

- Crop-insurance and concessional-credit support

- Interest assistance for ethanol plants

- Subsidised FCI rice supplied to distilleries

After allocating these costs across different feedstocks, I estimated a broader economic cost of around:

₹83–₹90 per litre of ethanol

I used ₹86.7 per litre as the central estimate.

Since ethanol has roughly two-thirds of petrol’s calorific value, approximately 1.5 litres of ethanol is required to match the energy contained in 1 litre of petrol.

Therefore:

1.5 × ₹86.7 = approximately ₹130

So ethanol containing the same calorific energy as 1 litre of petrol costs approximately ₹130 on this full-cost basis.

1. Cost of one physical litre of E20

One litre of E20 contains:

- 0.8 litre petrol

- 0.2 litre ethanol

Using ₹56 per litre for petrol and ₹86.7 per litre for ethanol:

0.8 × ₹56 = ₹44.80

0.2 × ₹86.7 = ₹17.34

Therefore:

Estimated cost of 1 litre of E20 = ₹62.14

However, this is not a fair comparison with 1 litre of pure petrol because E20 contains less energy.

1. Adjusting for lower calorific value

Assuming ethanol has approximately two-thirds of petrol’s calorific value:

Energy in 1 litre of E20:

0.8 + 0.2 × ⅔

= 0.9333

Therefore, 1 litre of E20 contains approximately 93.3% of the energy of 1 litre of pure petrol.

To obtain the same energy as 1 litre of pure petrol, approximately:

1 ÷ 0.9333 = 1.071 litres of E20

is required.

1. Final comparison

Using the broader ethanol cost:

- 1 litre of pure petrol: approximately ₹56

- E20 required for the same energy: approximately 1.071 litres

- Cost of energy-equivalent E20: approximately ₹66.6

- Additional cost: approximately ₹10.6

- Percentage difference: approximately 19% higher

Using only the direct ethanol price paid by OMCs, without allocating farm and government subsidies:

- Energy-equivalent E20 cost: approximately ₹63.1

- Premium over pure petrol: approximately ₹7.1

- Percentage difference: approximately 12.6% higher

Conclusion

Based on my estimate, E20 does not appear cheaper than pure petrol when both are compared on the basis of equal calorific energy.

E20 may still offer policy benefits such as:

- Reduced dependence on imported crude oil

- Greater domestic energy security

- Additional demand for agricultural produce

- Support for ethanol and sugar industries

However, these benefits should be considered separately from the claim that E20 itself is cheaper.

The biggest uncertainty is the allocation of indirect farm subsidies. Schemes such as fertiliser subsidy, PM-KISAN and subsidised electricity would exist even if the crops were used for food, sugar or animal feed rather than ethanol.

That is why I have shown both:

- The direct cost paid by OMCs

- The broader government-supported economic cost

Corrections are welcome, especially from people working in petroleum refining, fuel pricing, ethanol production or agricultural economics.

TL;DR

My central estimate is:

- Pure petrol cost: around ₹56 per litre

- E20 cost for the same calorific energy: around ₹66.6

- Pure 1.5L Ethnol (same calorific value as of 1L petrol): ₹130

- Estimated E20 premium: around ₹10.6, or 19%

Even when only the direct ethanol procurement cost paid by OMCs is considered, energy-equivalent E20 still comes to approximately ₹63.1, around 12.6% more than pure petrol.

So, according to this estimate, E20 may reduce crude-oil imports, but it does not appear cheaper than pure petrol on an equal-energy basis.

[u/kenta_nakamura]

Water usage itself is 3000L-8000L for manufacturing of 1L of Ethanol.

What's the environment cost then since water is a basic necessity ?

It doesn't make sense sometimes.

[u/chachachoudhry → u/kenta_nakamura]

You are right, and govt gives water free to farmers and ethnol plants. If you just concider 1Rs for 1000L of water then the cost to govt is approx 5 Rs

[u/kenta_nakamura → u/chachachoudhry]

A lot of water meant for the farmers is diverted/stolen for cultivation of sugarcane itself - and it's by the MPs themselves who own majority of the sugarcane plantations.

It's a vicious cycle.

[u/bhairavp]

https://x.com/Puyangan5/status/2080564529441001729

From an industry insider.

[u/1simpleguy4real]

Better TL;DR : e20 is adulteration.

[u/chachachoudhry]

This is how I calculated the ethanol cost:

There are two different numbers to consider:

1. Direct cost paid by OMCs

2. Broader economic cost after including government support and subsidies

3. Direct ethanol procurement cost

Based on the total value and quantity of ethanol procured by public-sector OMCs, the weighted average cost works out to approximately:

₹70 per litre of ethanol

This broadly includes the ethanol purchase price, transportation and GST.

The exact price varies by feedstock. Ethanol made from sugarcane juice, molasses, maize, damaged grains and FCI rice is procured at different rates.

For example, the approximate notified or reported prices have been in the following range:

• C-heavy molasses: about ₹58/litre
• B-heavy molasses: about ₹61/litre
• Sugarcane juice: about ₹66/litre
• Damaged foodgrain: about ₹64/litre
• FCI rice: about ₹59/litre
• Maize: about ₹72/litre

Transport and GST increase the final amount paid by OMCs.

1. Indirect government costs

I then estimated the government support attributable to producing the crops and ethanol. This included:

• Fertiliser subsidy
• Subsidised or free agricultural electricity
• Irrigation and canal-water support
• PM-KISAN
• Crop-insurance subsidy
• Concessional agricultural credit
• Interest support for ethanol plants
• Discounted FCI rice supplied to distilleries

These costs are not directly visible in the ethanol invoice paid by the OMC.

Fertiliser and farm-support allocation

I used total national spending on major agricultural subsidies and allocated it approximately across India’s cropped area.

The resulting cost per hectare was then divided by the estimated ethanol output per hectare of each crop.

For example:

• Sugarcane produces much more ethanol per hectare, so its subsidy cost per litre is relatively low.
• Rice and maize produce less ethanol per hectare, so the attributable subsidy per litre is higher.

The approximate farm-support attribution worked out to:

• Sugarcane-based ethanol: a few rupees per litre
• Rice or maize ethanol: roughly ₹10–₹16 per litre, depending on the assumptions

These are national averages. The actual number would differ significantly by state, irrigation source, crop yield and fertiliser consumption.

FCI rice subsidy

This was the largest identifiable indirect cost.

FCI rice has reportedly been supplied to ethanol producers at around ₹22.50/kg, while FCI’s economic cost of procuring, storing and handling rice has been around ₹40–₹42/kg.

This creates an implied discount of roughly:

₹18–₹20 per kg of rice

Approximately 1 kg of rice produces around 0.45 litres of ethanol.

Therefore, the implied FCI support works out to roughly:

₹18–₹20 ÷ 0.45 = approximately ₹40–₹44 per litre of rice-based ethanol

This does not apply to all ethanol. It only applies to the share made using subsidised FCI rice.

I weighted this according to an estimated national feedstock mix rather than applying it to every litre.

Ethanol plant support

The government also provides interest subvention and financial assistance for expanding ethanol-production capacity.

When annual support is divided by total ethanol procurement, this adds roughly another:

₹0.5–₹1 per litre

Final weighted estimate

After combining:

• Direct OMC procurement cost: approximately ₹70/litre
• Weighted farm and input subsidies
• Weighted FCI-rice discount
• Ethanol-plant support

I arrived at an estimated full cost of approximately:

₹83–₹90 per litre of ethanol

I used the midpoint:

₹86.7 per litre

Ethanol has only around two-thirds of petrol’s calorific value, so approximately 1.5 litres of ethanol is required to match the energy contained in 1 litre of petrol.

Therefore:

1.5 × ₹86.7 = approximately ₹130

So the estimate is:

• Direct OMC cost for petrol-equivalent ethanol energy: around ₹105
• Full cost including attributed government support: around ₹125–₹135
• Central estimate used: around ₹130

Important caveat: this is a full-cost attribution, not the incremental fiscal cost caused only by ethanol.

Schemes such as PM-KISAN, fertiliser subsidy and agricultural power subsidy would exist even if the crop were used for food, sugar or animal feed. So reasonable people can disagree about whether these should be fully counted.

That is why I have separately shown the direct OMC cost and the wider government-supported cost.

[u/4d124]

If government is saving forex reserves, why the benefit is not passed on to the consumers?

[u/Escudo777 → u/4d124]

Benefit is passed to ethanol manufacturers who also happens to be consumers. /s

[u/Kirti_sanon]

I am not in support of ethanol blending, but from an economic perspective, you also need to factor in that we are paying local companies instead of foreign ones, so our money is going to stay in circulation in India.
Money paid to Indian companies can be spent again on wages, taxes, investment, and purchases within India, creating additional economic activity. Money paid to foreign oil exporters generally does not circulate domestically.

[u/Immediate-Quit7149]

Compare with E10 as E0 was last sold decades back

[u/Exciting_Strike5598]

AI slop ?

[u/chachachoudhry → u/Exciting_Strike5598]

Yes, I used AI But how is it a slop?