The study examines the "Ethanol Blending Programme" in India. The study examines the ethanol blended petroleum pricing mechanism in India in comparison with the globally accepted price mechanism. The study finds that the cost of producing ethanol in India varies largely with molasses prices and hence cyclical variations in sugarcane production chiefly determine the cost of ethanol production. The study analyzes the price fixation at Rs. 27 per litre by the government by providing estimates of different expenditure heads of ethanol production costs.

This new study examines demand and supply aspects of the ethanol blending policy (EBP) of the Government of India. It examines the main sectors using ethanol. The preparedness of the automobile industry is a major factor in the successful implementation of this policy. In this context the issue of compatibility of vehicles to different levels of ethanol blending is also analyzed.