{"id":13693,"date":"2026-05-11T06:15:09","date_gmt":"2026-05-11T06:15:09","guid":{"rendered":"https:\/\/www.incredmoney.com\/blog\/?p=13693"},"modified":"2026-05-25T07:22:42","modified_gmt":"2026-05-25T07:22:42","slug":"the-sugarcane-in-your-petrol-tank","status":"publish","type":"post","link":"https:\/\/www.incredmoney.com\/blog\/the-sugarcane-in-your-petrol-tank\/","title":{"rendered":"The Sugarcane in Your Petrol Tank"},"content":{"rendered":"<p data-pm-slice=\"1 1 []\">Recently, I wrote about how India\u2019s petrol prices are set, and why they barely move even when crude oil crashes or rises. If you missed it, you can read it <a href=\"https:\/\/headsstart.substack.com\/p\/why-your-petrol-prices-may-not-go\" target=\"_blank\" rel=\"noopener noreferrer\">here<\/a>.<\/p>\n<p>But today, I want to talk about what\u2019s slowly replacing petrol itself.<\/p>\n<p>Fundamentally, India has two main problems when it comes to its energy mix. We import about 85% of our crude oil requirements, spending close to $100 billion a year on it. And the other is that we need to make our fuel mix cleaner in terms of carbon emissions and pollution.<\/p>\n<p>The good part is that India is working on a solution. India has been running one of the world\u2019s most ambitious fuel experiments for the past decade. The idea: replace a chunk of imported petrol with ethanol, an alcohol fuel made from crops grown right here. <strong>And in 2025, India quietly hit its E20 (20% Ethanol + 80% Petrol) target, five years ahead of schedule<\/strong>.<\/p>\n<p>If you\u2019ve recently read the news, India is formulating a policy to move to E85 (85% Ethanol + 15% Petrol) and E100 (Near-pure Ethanol).<\/p>\n<p>With ambitions as grand as these, it warrants a closer look by us to understand what\u2019s happening in this space.<\/p>\n<h2 id=\"what-is-ethanol-and-how-is-it-made\"><strong>What Is Ethanol, and How Is It Made?<\/strong><\/h2>\n<p>Ethanol is an alcohol, the same compound found in beer, just made in industrial quantities and at much higher purity. When blended with petrol, it can power a standard vehicle engine.<\/p>\n<p>To understand how ethanol is made, lets take an example of sugarcane-based ethanol. Cane is crushed, the juice is fermented by yeast, the resulting liquid is distilled to concentrate the alcohol, and then dehydrated to remove the last traces of water. What you end up with is anhydrous (a substance with no water) ethanol, 99.9% pure, ready to blend with petrol.<\/p>\n<p>Some other feedstock used to make ethanol in India is maize (corn) and rice.<\/p>\n<h2 id=\"different-technologies-of-producing-ethanol\"><strong>Different Technologies of Producing Ethanol<\/strong><\/h2>\n<p>When the actual food part of a crop is used to produce ethanol (as seen in the example above), it is called <strong>1G or First Generation technology<\/strong>. The process here is simpler and more straightforward. This is the ethanol that is currently commercially viable and available at scale.<\/p>\n<p>The drawback, of course, is that the crop gets diverted from food to fuel.<\/p>\n<p>To address this, India wants to move to <strong>2G or Second Generation<\/strong> ethanol, which is produced using agricultural residue instead of the crop itself. The technology is more complex and expensive, and while our OMCs have set up a few plants, they are still in early stages.<\/p>\n<p>Beyond 2G, there is also <strong>3G ethanol<\/strong>, which is algae-based, and <strong>4G<\/strong>, which uses CO\u2082 as a feedstock. Both are still in the research phase and nowhere close to commercial deployment.<\/p>\n<h2 id=\"ethanol-vs-petrol-the-honest-comparison\"><strong>Ethanol vs Petrol: The Honest Comparison<\/strong><\/h2>\n<div class=\"captioned-image-container\">\n<figure>\n<div class=\"image2-inset\">\n<picture><source srcset=\"https:\/\/substackcdn.com\/image\/fetch\/$s_!_oXK!,w_424,c_limit,f_webp,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fd7d948cd-6948-42d6-98f1-019a962bfad7_968x1092.png 424w, https:\/\/substackcdn.com\/image\/fetch\/$s_!_oXK!,w_848,c_limit,f_webp,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fd7d948cd-6948-42d6-98f1-019a962bfad7_968x1092.png 848w, https:\/\/substackcdn.com\/image\/fetch\/$s_!_oXK!,w_1272,c_limit,f_webp,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fd7d948cd-6948-42d6-98f1-019a962bfad7_968x1092.png 1272w, https:\/\/substackcdn.com\/image\/fetch\/$s_!_oXK!,w_1456,c_limit,f_webp,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fd7d948cd-6948-42d6-98f1-019a962bfad7_968x1092.png 1456w\" type=\"image\/webp\" sizes=\"100vw\" \/><img decoding=\"async\" class=\"sizing-normal aligncenter\" src=\"https:\/\/substackcdn.com\/image\/fetch\/$s_!_oXK!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fd7d948cd-6948-42d6-98f1-019a962bfad7_968x1092.png\" sizes=\"100vw\" srcset=\"https:\/\/substackcdn.com\/image\/fetch\/$s_!_oXK!,w_424,c_limit,f_auto,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fd7d948cd-6948-42d6-98f1-019a962bfad7_968x1092.png 424w, https:\/\/substackcdn.com\/image\/fetch\/$s_!_oXK!,w_848,c_limit,f_auto,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fd7d948cd-6948-42d6-98f1-019a962bfad7_968x1092.png 848w, https:\/\/substackcdn.com\/image\/fetch\/$s_!_oXK!,w_1272,c_limit,f_auto,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fd7d948cd-6948-42d6-98f1-019a962bfad7_968x1092.png 1272w, https:\/\/substackcdn.com\/image\/fetch\/$s_!_oXK!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fd7d948cd-6948-42d6-98f1-019a962bfad7_968x1092.png 1456w\" alt=\"\" width=\"728\" height=\"821.2561983471074\" data-attrs=\"{&quot;src&quot;:&quot;https:\/\/substack-post-media.s3.amazonaws.com\/public\/images\/d7d948cd-6948-42d6-98f1-019a962bfad7_968x1092.png&quot;,&quot;srcNoWatermark&quot;:null,&quot;fullscreen&quot;:false,&quot;imageSize&quot;:&quot;normal&quot;,&quot;height&quot;:1092,&quot;width&quot;:968,&quot;resizeWidth&quot;:728,&quot;bytes&quot;:null,&quot;alt&quot;:null,&quot;title&quot;:null,&quot;type&quot;:null,&quot;href&quot;:null,&quot;belowTheFold&quot;:false,&quot;topImage&quot;:false,&quot;internalRedirect&quot;:null,&quot;isProcessing&quot;:false,&quot;align&quot;:&quot;center&quot;,&quot;offset&quot;:false}\" \/><\/picture>\n<div><\/div>\n<\/div>\n<\/figure>\n<\/div>\n<p>Additionally, there\u2019s one more issue with ethanol blending. Older cars, especially before 2010, were not designed for ethanol blends. Ethanol absorbs water and can corrode older rubber seals and fuel components over time.<\/p>\n<h2 id=\"why-going-beyond-e-20-is-hard\"><strong>Why Going Beyond E-20 is Hard<\/strong><\/h2>\n<p>Hitting E20 was genuinely impressive. Going beyond it will be harder. Three structural problems keep coming up.<\/p>\n<p><strong>Food vs Fuel<br \/>\n<\/strong><br \/>\nIndia\u2019s ethanol programme has shifted heavily toward grains. Maize now contributes more ethanol than all sugarcane-based sources combined. In 2024, India imported maize for the first time in decades, partly because so much domestic supply was diverted to distilleries. When a food crop becomes a fuel crop, prices move and food security questions follow.<\/p>\n<p><strong>Sugarcane Economics Are Squeezed<\/strong><\/p>\n<p>The government controls both ends of the transaction: the price distilleries pay farmers for sugarcane, known as the FRP (Fair &amp; Remunerative Price), and the price at which distilleries sell ethanol to OMCs.<\/p>\n<p>Over the past three years, the FRP has risen 16.5% but the ethanol selling price hasn\u2019t moved.<\/p>\n<p>Distilleries are caught in the middle where their input costs are rising, but their revenue is capped leading to a squeeze in their margins.<\/p>\n<p><strong>Engine Compatibility Is a Ceiling<\/strong><\/p>\n<p>E20 works in standard petrol engines with minor tuning. E85 and E100 need a Flex-Fuel engine, a different architecture that most vehicles on Indian roads don\u2019t have. Until a meaningful share of the vehicle fleet is Flex-Fuel-capable, higher blending targets remain on paper.<\/p>\n<p><strong>Why Everyone Keeps Talking About Brazil<\/strong><\/p>\n<p>Brazil, the biggest success story in ethanol, is becoming the benchmark for India.<\/p>\n<p>Brazil launched its Pro-\u00c1lcool programme in 1975, right after the first oil shock. The government guaranteed purchase prices, subsidised distilleries, and mandated blending. Within a decade, they had the world\u2019s largest ethanol industry.<\/p>\n<p>Today, nearly all Brazilian petrol contains at least 27% ethanol (meaning, no pure petrol). Around 80% of new cars sold are Flex-Fuel. A driver can choose between between blended ethanol (eg. E20) &amp; E100 at the same pump.<\/p>\n<h2 id=\"who-is-playing-in-this-space\"><strong>Who Is Playing in This Space?<\/strong><\/h2>\n<p>The ethanol value chain has several distinct segments. Each has a different set of players and a different set of risks.<\/p>\n<div class=\"captioned-image-container\">\n<figure>\n<div class=\"image2-inset\">\n<picture><source srcset=\"https:\/\/substackcdn.com\/image\/fetch\/$s_!wlEA!,w_424,c_limit,f_webp,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fdeed4229-0818-42a3-9fc3-d985ee13377d_1188x1407.png 424w, https:\/\/substackcdn.com\/image\/fetch\/$s_!wlEA!,w_848,c_limit,f_webp,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fdeed4229-0818-42a3-9fc3-d985ee13377d_1188x1407.png 848w, https:\/\/substackcdn.com\/image\/fetch\/$s_!wlEA!,w_1272,c_limit,f_webp,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fdeed4229-0818-42a3-9fc3-d985ee13377d_1188x1407.png 1272w, https:\/\/substackcdn.com\/image\/fetch\/$s_!wlEA!,w_1456,c_limit,f_webp,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fdeed4229-0818-42a3-9fc3-d985ee13377d_1188x1407.png 1456w\" type=\"image\/webp\" sizes=\"100vw\" \/><img decoding=\"async\" class=\"sizing-normal aligncenter\" src=\"https:\/\/substackcdn.com\/image\/fetch\/$s_!wlEA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fdeed4229-0818-42a3-9fc3-d985ee13377d_1188x1407.png\" sizes=\"100vw\" srcset=\"https:\/\/substackcdn.com\/image\/fetch\/$s_!wlEA!,w_424,c_limit,f_auto,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fdeed4229-0818-42a3-9fc3-d985ee13377d_1188x1407.png 424w, https:\/\/substackcdn.com\/image\/fetch\/$s_!wlEA!,w_848,c_limit,f_auto,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fdeed4229-0818-42a3-9fc3-d985ee13377d_1188x1407.png 848w, https:\/\/substackcdn.com\/image\/fetch\/$s_!wlEA!,w_1272,c_limit,f_auto,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fdeed4229-0818-42a3-9fc3-d985ee13377d_1188x1407.png 1272w, https:\/\/substackcdn.com\/image\/fetch\/$s_!wlEA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep\/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fdeed4229-0818-42a3-9fc3-d985ee13377d_1188x1407.png 1456w\" alt=\"\" width=\"728\" height=\"862.2020202020202\" data-attrs=\"{&quot;src&quot;:&quot;https:\/\/substack-post-media.s3.amazonaws.com\/public\/images\/deed4229-0818-42a3-9fc3-d985ee13377d_1188x1407.png&quot;,&quot;srcNoWatermark&quot;:null,&quot;fullscreen&quot;:false,&quot;imageSize&quot;:&quot;normal&quot;,&quot;height&quot;:1407,&quot;width&quot;:1188,&quot;resizeWidth&quot;:728,&quot;bytes&quot;:null,&quot;alt&quot;:null,&quot;title&quot;:null,&quot;type&quot;:null,&quot;href&quot;:null,&quot;belowTheFold&quot;:false,&quot;topImage&quot;:false,&quot;internalRedirect&quot;:null,&quot;isProcessing&quot;:false,&quot;align&quot;:&quot;center&quot;,&quot;offset&quot;:false}\" \/><\/picture>\n<div><\/div>\n<\/div>\n<\/figure>\n<\/div>\n<h2 id=\"the-final-takeaway\"><strong>The Final Takeaway<\/strong><\/h2>\n<p>India hitting E20 is a genuine milestone. The infrastructure has been built, the supply chains are working, and the habit of buying blended fuel is becoming normal. That part of the story is largely done.<\/p>\n<p>The next chapter, getting from E20 to E85 and E100, is a harder problem. It requires more Flex-Fuel vehicles, a bigger feedstock base that doesn\u2019t compete with food, and pricing policies that keep distilleries economically viable.<\/p>\n<p data-pm-slice=\"1 1 []\">Brazil took 50 years. India is about 10 years into a serious attempt. The direction is right but our success would depend entirely on how consistently the government manages the overall policy for fuels.<\/p>\n<hr \/>\n<p>If you enjoyed this newsletter, feel free to share it with your friends and family using the link below.<\/p>\n<p>Till the next time,<br \/>\nVijay<br \/>\nCEO &#8211; InCred Money<\/p>\n<p>P.S. I share my thoughts on Investing and the Economy regularly. You can <a href=\"https:\/\/xsqg-zgpl.maillist-manage.com\/click\/16dac2889a07c821\/16dac28899b46fa6\" target=\"_blank\" rel=\"noopener noreferrer\">follow me here<\/a>.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Recently, I wrote about how India\u2019s petrol prices are set, and why they barely move even when crude oil crashes or rises. If you missed it, you can read it here. But today, I want to talk about what\u2019s slowly replacing petrol itself. Fundamentally, India has two main problems when it comes to its energy [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":13694,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[5],"tags":[10],"class_list":["post-13693","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-newsletter","tag-newsletter"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How Sugarcane Is Powering the Fuel in Your Petrol Tank | Incred Money<\/title>\n<meta name=\"description\" content=\"Ethanol blended with petrol is changing India\u2019s fuel economy. 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