The Supreme Court on Tuesday ordered status quo on ethanol supply allocations for the Ethanol Supply Year (ESY) 2025-26, triggering a dispute that the Center says could have major implications for India’s flagship ethanol blending program and its broader energy security strategy.
A bench of Justices M M Sundresh and Shil Nagu passed the interim order while hearing a plea by Bharat Petroleum Corporation Limited (BPCL), the industry coordinator for the ethanol-blended petrol programme, challenging a Karnataka High Court direction which the Center claimed was likely to reopen ethanol allocations that had already been finalized and implemented substantially.
The court issued notice on BPCL’s plea and stayed any change under the existing allotment framework till further orders.
The issue is important because it comes at a time when India has already achieved its target of blending 20% ethanol with petrol – five years ahead of schedule.
During the hearing, Attorney General R Venkataramani, representing BPCL and other oil marketing companies (OMCs), argued that the Karnataka High Court order had ramifications far beyond a dispute involving a single supplier and could destabilize a nationwide allocation process involving hundreds of ethanol manufacturers.
The Attorney General reported that ethanol supply contracts for ESY 2025-26 had already reached the final stage in October 2025 and allocations had been sent to 378 suppliers for approximately 10,500 million liters of ethanol. According to BPCL, around 6,800 million liters have already been supplied under the allotment by mid-June.
He said allowing enhanced allocation to one supplier at this point would likely lead to similar claims from other manufacturers across the country, potentially opening the floodgates of litigation and disrupting the carefully calibrated supply chain that supports the national blending program.
When the bench asked why BPCL had not first approached a division bench of the Karnataka High Court, Venkataramani said similar disputes were pending before several high courts and the issue required formal resolution in a single forum. He also sought time to file the transfer petitions so that all relevant matters could be heard together.
“This will affect national policy,” he told the court, adding that the issue needed to be resolved before the next round of ethanol purchasing contracts could be renewed.
The dispute relates to a petition filed by Karnataka-based VINP Distilleries and Sugars Pvt Ltd, a specialist ethanol manufacturer, which had challenged the quantity allocated to it by the OMCs for ESY 2025-26.
The company claimed before the Supreme Court that despite having an annual production capacity of about 99 million liters and bidding for the supply of 92.6 million litres, it was allocated only 39.2 million litres.
VINP claimed that as an ethanol allotment manufacturer, which is contractually prohibited from manufacturing other products or supplying ethanol to third parties, it had a legitimate expectation that the existing allotment policy would continue to operate in a manner consistent with prior years.
Accepting this contention, the Karnataka High Court directed the OMCs to consider and decide on the representation of the company seeking enhanced allocation. The Supreme Court held that dedicated ethanol plants could not be put at a disadvantage after they structured their business models around long-term purchasing arrangements with oil companies.
“Dedicated ethanol plants, which have hitherto supplied ethanol exclusively to OMCs and are contractually prohibited from manufacturing anything else or supplying ethanol to any third party, cannot now be relegated to the short end of the stick,” the apex court noted.
However, the Center asserts that the matter risks judicial interference in a complex policy framework that involves allocating limited quantities of purchases among hundreds of suppliers across multiple states.
According to BPCL, cumulative bids exceeding 17,500 million liters were received under the tender process, while only about 10,480 million liters were allocated. No individual supplier can claim an enforceable right to supply ethanol equivalent to its full production capacity when allocations have to be balanced across the country, the company said.
The Supreme Court hearing also comes against the backdrop of an increasingly vocal public debate about the ethanol blending program itself.
While sectors of car enthusiasts and consumers have raised concerns about the potential effects of higher ethanol blends on vehicle performance, fuel efficiency and engine durability, the government has consistently defended the policy.
Last week, the Federal Petroleum Ministry issued a detailed clarification rejecting claims that E20 fuel can negatively impact vehicle insurance coverage. She said the concerns raised in public discourse were examined with stakeholders and found to be unfounded.
The Ministry stressed that ethanol blending is a globally accepted practice followed in countries such as Brazil, the United States and Japan, and stressed that the program has already helped India save more than $1.4 million crores of foreign exchange by reducing dependence on imported crude oil.
The government also considered the program a key pillar of its strategy to improve energy security and support farmers by increasing demand for agricultural raw materials and reducing carbon emissions from the transportation sector.
