Nepal has moved closer to introducing ethanol-blended petrol, with the Nepal Bureau of Standards & Metrology releasing a draft standard for ethanol to be mixed with motor gasoline.

The proposed standard divides ethanol production sources and technologies into three categories and sets strict requirements for storage, labelling and quality control. Since ethanol is highly flammable, the draft requires it to be stored in secure, dry and leak-proof drums or tanks.

Each container must include details such as the producer’s information, batch number, quantity and type of production technology, according to the draft.

The ethanol must be completely clean, transparent and free of suspended solid particles. The draft also prohibits the use of harmful substances such as methanol, turpentine, ketones and tar as denaturants, which are added to make ethanol that could damage vehicle engines, rubber pipes and fuel systems.

Ethanol produced for blending with petrol must have a minimum purity level of 99.5 percent.

The bureau has invited comments and suggestions from consumers and stakeholders to make the standard more practical, scientific and effective before final approval.

“We have already made the draft public for suggestions and feedback. We will finalise it after incorporating relevant recommendations,” said Prabhat Kumar Singh, deputy director general and spokesperson of the department. “The standard will come into effect only after approval from a meeting chaired by the industry minister.”

The move follows a Cabinet decision on January 5, 2026, to approve the “Order on the Use of Ethanol Blended Petrol, 2026”. The order came into force after being published in the Nepal Gazette on March 12, 2026.

The government aims to encourage ethanol production from locally available raw materials, create jobs and reduce dependence on imported petrol by blending ethanol into fuel.

Under the order, Nepal Oil Corporation (NOC) will have to blend up to 10 percent ethanol into petrol depending on availability. The government can revise the blending ratio through a Cabinet decision.

The order also bars the use of edible grains as raw materials for ethanol production, citing possible risks to food security.

Approved raw materials include molasses from sugar industries, Napier grass, agricultural and forest waste biomass, rice straw, corn stalks, wheat husks, spoiled grains unsuitable for food use, cassava, yeast and other chemicals required for fermentation.

Industries must produce ethanol using environmentally friendly methods and sell the final product only to Nepal Oil Corporation.

The bureau will determine ethanol quality requirements, and NOC will be allowed to purchase only ethanol that meets those standards.

A government recommendation committee will determine ethanol prices before the beginning of each fiscal year. Until a new price is fixed, the previous year’s price will remain in effect. The revised price will apply from mid-July each year.

NOC will sign purchase agreements with ethanol producers, who will be responsible for supplying the required quantity at designated locations and times. Companies that fail to meet contractual obligations could face compensation claims under existing laws.

The order places responsibility for ethanol transportation on producers and requires strict safety measures because ethanol is highly flammable and absorbs water easily. The ministry will prepare separate standards for safe storage, blending and transportation.

The committee responsible for recommending ethanol prices and incentives will be led by the secretary of the Ministry of Industry, Commerce and Supplies. Representatives from the finance and agriculture ministries, the Nepal Bureau of Standards & Metrology, the Nepal Academy of Science and Technology and the Nepal Oil Corporation will serve as members.

The committee will consider factors including raw material costs, factory overheads, administrative expenses and operational costs while recommending prices.

Netra Prasad Subedi, spokesperson for the industry ministry, said the pricing process would begin after the quality standards are finalised.

“The quality standard process is underway. Once that is completed, the process for determining prices will move forward,” he said.

The committee will also recommend issues such as tax exemptions, industry incentives, national priority status, customs benefits for equipment imports, and subsidies for farmers and agricultural cooperatives on fertiliser, seeds and electricity costs.

Nepal Oil Corporation had invited applications on May 18 from producers interested in supplying ethanol that meets quality and technical requirements. NOC spokesperson Manoj Thakur said the notice was issued after the government order was published in the Nepal Gazette.

Eight companies have submitted applications to produce and sell ethanol, according to Thakur. However, further progress has not been made with some applicants.

Nepal’s plan to introduce a maximum 10 percent ethanol blend comes as neighbouring India has already moved to a 20 percent blend.

India began mixing ethanol into petrol in the mid-2000s using crops such as sugarcane and maize. The share has gradually increased over the years.

After achieving its target of 20 percent ethanol blending in the 2025-26 fiscal year, India made E20, petrol containing 20 percent ethanol, the standard fuel at all petrol stations. It replaced the earlier E10 blend.

However, some Indian consumers have raised concerns that ethanol blends could damage engines, reduce mileage and affect vehicle performance.

The Indian government has rejected those concerns as ‘misleading’ and ‘social media misinformation’. In a statement issued in June, it said E20 was introduced only after extensive testing and does not damage vehicle engines.

Six vehicle manufacturers also said last week that years of testing and service data had found no evidence of widespread vehicle damage caused by 20 percent ethanol blending.

However, manufacturers acknowledged that E20 could reduce fuel mileage by around 3 to 3.5 percent because ethanol contains less energy than petrol, according to BBC reports.

India says its biofuel programme aims to reduce its oil import bill, support farmers and cut pollution. Ethanol burns cleaner than petrol and can be produced domestically from crops such as sugarcane and maize.

India imports most of the crude oil it needs, and disruptions in global oil markets during conflicts involving major oil-producing regions have strengthened arguments for increasing domestic fuel production.

India began using 10 percent ethanol blending in petrol in 2021-22 and reached its 20 percent E20 target in 2025, five years ahead of schedule. However, critics have argued that vehicle manufacturers were not given enough time to adapt.

More than 75% of vehicles on Indian streets are not E20 compliant, said Puneet Gupta, director of auto research firm Mobility Global told BBC. A Thomson Reuters Foundation analysis also found that only around 20 percent of petrol vehicles sold in India over the past 15 years were ethanol-compatible.