Ethanol Blending Policy Nears Implementation After Two Decades

Minister for Industry, Commerce and Supplies Anil Kumar Sinha said on Sunday, February 22, that the government will soon implement a policy mandating a 10 percent ethanol blend in petrol.

Speaking at an interaction programme on the opportunities, challenges, and implementation strategy of the policy, organised by the Society of Economic Journalists–Nepal (SEJON) in Kathmandu, Minister Sinha said the move would help cut carbon dioxide emissions and lower Nepal’s annual petroleum import bill by around Rs 6 billion, easing pressure on the country’s widening trade deficit.

Petroleum products dominate Nepal’s imports. Petrol was Nepal’s third-largest import by value, after crude soybean oil and diesel, in the first seven months of the current fiscal year 2025/26. According to the Department of Customs, the country imported 442,787 kilolitres of petrol worth Rs 38.13 billion during the period.

The policy has reached the implementation stage after nearly two decades of studies and consultations.

“All necessary groundwork has now been completed, and the “Order on Using Ethanol Blended Petrol, 2082” has been approved,” he said, adding that it would soon be published in the Gazette.

He noted that wider ethanol use could stimulate sugarcane cultivation and other agricultural production. However, he acknowledged challenges related to establishing new industries, improving the investment climate and ensuring a steady supply of raw materials.

While the sector could attract foreign investment, Sinha stressed the need to maintain fair competition. “For ethanol blending to be viable, ethanol prices must remain lower than petrol prices,” he said, adding that related operational procedures would be introduced shortly.

Govinda Bahadur Karki, secretary at the Office of the Prime Minister and Council of Ministers, said multiple commissions and advisory committees had previously studied ethanol blending, and the government order was issued based on their recommendations. Calling the policy a national priority, he expressed confidence that the new government to be formed after the March 5 elections would implement it without delay.

Nepal is scheduled to vote next Thursday to elect the 275-member House of Representatives. Of the total seats, 165 will be filled under the first-past-the-post system and 110 through proportional representation.

Chandika Prasad Bhatta, managing director of the Nepal Oil Corporation, said the long-prepared programme has formally entered the implementation phase and will not be rolled back. Full implementation, he said, could take between one and one-and-a-half years, with work already underway to set ethanol quality standards.

Shivaram Pokharel, joint secretary at the Ministry of Industry, Commerce and Supplies, said the Cabinet decided to move ahead with the policy around two months ago. Although Nepal does not yet produce ethanol at a commercial scale, he said the order has created a legal pathway for domestic production.

The government will soon recommend a minimum ethanol price, finalise quality standards and begin a bidding process. Once the order is gazetted, a price-fixation committee will be formed and companies selected based on production capacity. As this is a new initiative, Pokharel said, implementation will take time, but international practices have been carefully studied.

Private-sector representatives said that while raw materials are available, a more conducive business environment is essential. Bed Prasad Kharel, chairman of Kiaan Chemical, pointed to bureaucratic hurdles and called for stronger government support mechanisms.

Shashi Kant Agrawal, president of the Nepal Sugar Mills Association, said Nepal consumes around 240,000 metric tonnes of sugar annually but produces about 200,000 metric tonnes domestically. While the country could become self-sufficient within two years, he said procedures and a clear implementation roadmap for ethanol blending remain unclear.

Consumer rights activist Madhav Timilsina urged greater clarity on pricing, quality control and market regulation. Without clear provisions on pricing, monitoring and enforcement, he warned, the objective of import substitution may not be achieved.

India achieved its target of blending 20 percent ethanol with petrol, known as E20, in July 2025—five years ahead of schedule. Indian authorities have said the programme has significantly reduced carbon emissions and saved billions of dollars in crude oil imports.

“But it has also sparked worries among vehicle owners and food policy experts about its potential impact on fuel efficiency and food security,” BBC reported in August 2025. “But many vehicles in India are not E20-compliant, making their owners sceptical about the benefits of the policy.”

(With inputs from RSS)