Government revives 22-year-old ethanol blending plan, Prepares to mix 10% biofuel in Petrol

KATHMANDU: Nepal is preparing to implement a long-pending plan to blend 10 percent ethanol in petrol, reviving a biofuel policy that remained stalled for more than two decades despite being published in the Nepal Gazette in 2060 BS (2003 AD).

The move is now being pushed forward under the government’s updated National Biofuel Strategy, with officials framing it as a major step toward energy diversification, import substitution, and environmental protection.

The government has already given in-principle approval to the policy of selling petrol mixed with 10% ethanol, triggering renewed debate over its economic, environmental, and industrial implications.

Push for Cleaner, Less Import-Dependent Energy

Industry stakeholders say the initiative aligns Nepal with a global shift toward cleaner and renewable energy. Rajan Babu Shrestha, CEO of Sipradi Trading, said the world is gradually reducing dependence on fossil fuels and moving toward sustainable alternatives.

According to him, ethanol blending does not cause mechanical problems in vehicles, describing it as an internationally tested practice. “This is a global effort. It does not harm vehicles. If implemented effectively, it will reduce fuel imports,” he said.

The plan is expected to cut petroleum imports in proportion to the blending rate, easing pressure on Nepal’s foreign currency reserves and trade deficit.

Sugar Industry Welcomes Move, But Procedure Missing

The decision has been welcomed by the domestic sugar industry, though producers say progress is stalled by the lack of an operational procedure.

Shashikant Agrawal, President of the Nepal Sugar Mills Association, called the decision positive but stressed that production cannot begin until a clear working procedure is in place.

“The government has made a good decision, though very late. But everything is stuck in the procedure. Only after that is finalized can the project move ahead,” he said.

Agrawal noted that ethanol production in Nepal would have multi-dimensional benefits. The primary raw material, molasses, a by-product of sugarcane processing, would create additional income for sugarcane farmers while saving billions of rupees spent annually on petrol imports.

He also claimed that using 10% ethanol-blended petrol could reduce vehicular pollution by up to 30% and help extend engine life.

Alternative Feedstock Under Study

Molasses alone may not meet national demand, prompting the government to study additional raw materials. According to the Ministry of Industry, Commerce and Supplies, “Simal tarul” (a starchy tuber) has emerged as a promising alternative. It can be grown in barren land from the Tarai to mid-hills with minimal water, potentially attracting agribusiness investment.

Officials believe local feedstock production could stimulate rural economies while supporting energy security.

Environmental and Climate Commitments

The ministry says ethanol blending will also have positive environmental impacts. Compared to pure petroleum fuels that emit harmful carbon monoxide, ethanol-blended fuels produce comparatively lower net carbon emissions and are considered more eco-friendly.

This is expected to support Nepal’s international commitments to reduce carbon emissions.

Global Practices

Nepal’s plan mirrors global trends:

Brazil, the world leader, blends up to 27% ethanol in petrol, a practice dating back to the 1970s.

The United States uses around 10% ethanol, with plans to increase to 15%.

India currently blends 10–12% and aims to reach 20% soon.

Countries such as Thailand, Canada, and several European nations mandate 5–10% blending.

Zero Commercial Production So Far

Despite past policies, Nepal currently has no commercial ethanol production for fuel use. Agrawal estimates that installing ethanol plants alongside existing distilleries would require an investment of Rs 300–400 million per unit.

Industrialists are ready to invest, he said, but demand government purchase guarantees, clear pricing, and quality standards.

Ethanol can also be produced from maize, sweet potatoes, and other biomass sources, he added.

Nepal Oil Corporation to Lead Implementation

The Nepal Oil Corporation (NOC) is the implementing agency. It is preparing standards for ethanol quality, blending ratios, and agreements with producers.

The FY 2082/83 BS (2025/26 AD) budget had already announced implementation of bio-ethanol blending to reduce pollution and fuel imports.

Earlier, on Mangsir 29, 2060 BS (December 14, 2003 AD), the government had mandated 20% blending via Gazette notice, but the policy remained unimplemented due to the absence of technical standards and procedures.

A new Cabinet-approved directive, “Order on Blending Ethanol in Petrol, 2082 BS (2025/26 AD)”, has now provided a legal basis for blending up to 10%.

Major Practical Challenges

Despite policy momentum, implementation remains difficult.

NOC spokesperson Manoj Thakur said Nepal would need around 200,000 liters of ethanol per day for 10% blending. Current sugar mills produce only about 25,000 liters daily, and only during the sugarcane crushing season.

Another challenge is purity. Existing production is about 95% pure ethanol, while fuel blending requires 99.5%+ anhydrous ethanol. This requires new dehydration plants and additional investment.

“Blended petrol cannot be supplied inconsistently. We must ensure year-round availability before market rollout,” Thakur said.

No Ethanol Imports Allowed

Under the plan, ethanol imports will not be permitted. Only domestically produced ethanol will be used. Quality standards will be set by the Nepal Bureau of Standards and Metrology, while pricing will be determined by a committee including the government, NOC, and industry representatives.

Fuel Price Impact Uncertain

Whether blended petrol will be cheaper remains unclear. Officials say it depends on production costs and the price set for ethanol procurement. The policy is being framed less as a short-term price measure and more as a long-term economic and environmental reform.

Timeline

The ministry says small-scale blending could begin within one to two months, but full implementation will take longer due to raw material supply, plant installation, and technical preparation.

While the policy marks a significant shift in Nepal’s fuel strategy, its success will depend on rapid procedural clarity, industrial investment, and sustained feedstock supply.