Since 1 April 2026, every petrol pump in India has been selling only E20 — ordinary petrol with 20 per cent ethanol mixed in, a target originally scheduled for 2030 but achieved five years ahead of time. As covered in our earlier article on ethanol, the programme has genuinely cut India’s crude oil import bill and its carbon footprint.
Given that India is dependent on imported petroleum, the ethanol blending program is completely justified. It has become even more important in the current global scenario that has affected and obstructed global energy supplies. But use of ethanol as fuel has raised two major questions. First is the damage caused by blended fuel to the vast majority of vehicles that were never designed for it, and the second is the question of diverting agricultural products for producing ethanol to be blended with petrol.
The evidence on vehicle damage has been genuinely mixed. A survey by LocalCircles drawing over 37,000 responses from 331 districts found that about 28 per cent of petrol-vehicle owners, mostly those with cars bought in 2022 or earlier, reported unusual wear or repairs after the rollout, while nearly two out of three respondents said their mileage had fallen by 2 to 5 per cent. An analysis of Society of Indian Automobile Manufacturers data found that only about 20 per cent of new petrol vehicles sold in the last fifteen years are actually E20-compliant, since most manufacturers only began building E20-ready engines after April 2023, leaving well over 200 million older cars and two-wheelers running on a fuel blend they were never engineered for.
Union Minister Nitin Gadkari has repeatedly dismissed the damage claims as “overblown” and part of a “false narrative,” but in a Rajya Sabha reply, he conceded that certain rubber components and engine gaskets in BS3-era vehicles manufactured between 2005 and 2016 may need replacement during routine servicing. In July 2026, a consumer forum in Raipur delivered what is reportedly India’s first E20-linked consumer verdict, ordering a manufacturer and dealer to compensate a car owner for repeated engine problems the owner attributed to the fuel. The government’s own position, reiterated through the Ministry of Petroleum and Natural Gas, is that mileage typically dips by only 1 to 2 per cent in new vehicles and about 6 per cent in older ones — manageable, in its view, but clearly not zero.
This is, at its root, a chemistry problem. As explained in our previous articles, ethanol is an alcohol, not a hydrocarbon: it carries its own oxygen atom, has a lower calorific value than petrol, and is mildly corrosive and hygroscopic (water-attracting) towards certain rubber and metal fuel-system components. Blend too much of it into petrol and you inevitably run into a “blend wall” — a point beyond which engines, seals and fuel lines need re-engineering.
Layered on top of this is the food-versus-fuel debate over diverting sugarcane and foodgrains for producing ethanol. And underneath both of these problems sits the deeper, slower-moving problem of crude oil itself: Wood Mackenzie has flagged a potential 300-billion-barrel supply gap by 2050 as production from currently sanctioned oilfields declines, 2025 was one of the weakest years in a decade for new oil discoveries worldwide, and analysts at Welligence warn the global oil and gas supply gap could reach 25 million barrels a day by 2040 without sustained deepwater investment. India, which imports the vast majority of its crude, has no control over such investment. Moreover, current geopolitics ensures that crude oil produced by several countries are not available for purchase in the open market, which is a big problem for import-dependent India.
What if there were a fuel that solved all these problems at once? A fuel that is not blended with petrol but is petrol — chemically indistinguishable from it, usable at 100 per cent concentration in any existing engine, with no blend wall and no corrosion risk — and one that could be manufactured from locally available raw materials and ingredients, without touching a single foodgrain? This is precisely the promise of synthetic fuel, and it is the subject of this article.
Synthetic fuel — sometimes called synfuel, or “e-fuel” when made using renewable electricity — is a liquid hydrocarbon fuel manufactured through deliberate chemical synthesis, rather than refined from crude oil pumped out of the ground or blended in as a separate oxygenate like ethanol. Such fuels are often labelled using an “X-to-Liquid” naming convention: CTL (coal-to-liquid), GTL (gas-to-liquid), BTL (biomass-to-liquid), and PTL (power-to-liquid, using renewable electricity, water and captured CO₂).
The crucial distinction from ethanol blending is the idea of a “drop-in” fuel. A drop-in synthetic fuel is built up, molecule by molecule, into the same families of hydrocarbons — paraffin, olefin, naphthene and aromatic — that petroleum refining naturally produces. Because the end product is chemically the same kind of substance as conventional petrol, diesel or jet fuel, it can be used at full, 100 per cent strength in existing engines, pipelines, storage tanks and pumps, without needing flex-fuel engines, without any blending, and without ethanol’s corrosion and water-absorption issues.
Broadly, every synthetic fuel technology achieves this in one of two ways: either by stitching small molecules (carbon monoxide, carbon dioxide, hydrogen, methanol, ethanol) together into longer hydrocarbon chains through catalysis, or by breaking down large, unwieldy molecules (coal, biomass, plastic waste) into the right-sized hydrocarbon fragments through cracking and hydrogenation.
Most synthetic fuel production process begin with, or pass through, a mixture called synthesis gas or “syngas” — carbon monoxide and hydrogen — produced by gasifying coal, biomass or natural gas, or by combining captured CO₂ with hydrogen made through renewable-powered electrolysis of water. From syngas, chemistry can proceed down two broad paths. The first is direct polymerisation of carbon monoxide and hydrogen into long-chain hydrocarbons over a metal catalyst, following a Fischer-Tropsch-type reaction: roughly, n CO + (2n+1) H₂ → CₙH₂ₙ₊₂ + n H₂O. The second is to first synthesise methanol (CO + 2H₂ → CH₃OH, or CO₂ + 3H₂ → CH₃OH + H₂O) and then dehydrate and rebuild that methanol into gasoline-range hydrocarbons over a zeolite catalyst.
Both paths terminate in the same place: a liquid made of carbon and hydrogen atoms arranged in the molecular families petrol engines were designed around, with none of the oxygen-carrying alcohol structure that makes ethanol behave differently inside an internal combustion engine. This is the underlying reason a synthetic fuel, unlike a blended one, needs no special engine, no flex-fuel calibration and no compatibility caveat.
Fischer-Tropsch (FT) synthesis is the oldest and most industrially proven synthetic fuel technology, developed by German chemists Franz Fischer and Hans Tropsch in the 1920s. It found its most consequential home in South Africa, where, cut off from imported crude first by international isolation and later by apartheid-era sanctions, the state-backed company Sasol built its business on converting the country’s abundant coal into liquid fuel — a process which was also used by Nazi Germany during the Second World War for the same strategic reason: no accessible domestic oil.
The process works by first gasifying coal or natural gas with steam and oxygen to produce syngas, which is then cleaned of impurities, commonly using a Rectisol acid-gas wash to strip out hydrogen sulphide and CO₂, before being passed over an iron- or cobalt-based catalyst inside FT reactors, where the carbon monoxide is stitched into a wide range of paraffinic hydrocarbons — from light gases through to heavy waxes — which are then refined and cracked into finished petrol, diesel and other products.
Sasol’s Secunda complex in South Africa, built around 97 Lurgi gasifiers and an iron-based FT catalyst, has produced roughly 150,000 to 160,000 barrels a day of liquid fuel from coal since the early 1980s. Where natural gas rather than coal is used as feedstock, the same core FT chemistry is called gas-to-liquid (GTL); Sasol’s joint venture with Qatar Petroleum, the Oryx GTL plant at Ras Laffan, used a newer, lower-temperature FT technology to produce around 34,000 barqrels a day at a cost of roughly $950 million.
FT-based coal liquefaction is not without honest trade-offs: analysts note that Sasol and South Africa’s Eskom together account for over half the country’s carbon emissions, a reminder that FT is only as clean as the syngas feeding it.
India, which has been eyeing coal-to-liquid technology as oil prices rise, has not yet built a commercial FT plant of its own. But the union govt has started initiatives in this regard. In January 2024, the union cabinet approved an outlay of ₹ 8,500 crore as financial incentive for promotion of coal/lignite gasification projects for both government PSUs as well as private sector. In May this year, the Modi govt approved a Scheme for Promotion of Surface Coal/Lignite Gasification Projects with a financial outlay of ₹37,500 crore.
India holds one of the world’s largest coal reserves (~401 billion tonnes) and lignite reserves (~47 billion tonnes). Therefore, gasification of these resources can enable India to substitute high-value imports and insulate itself from global supply disruptions and price volatility.
The Methanol-to-Gasoline (MTG) process takes a more selective shortcut than Fischer-Tropsch. Discovered by Mobil Oil Corporation scientists in the 1970s using a proprietary ZSM-5 zeolite catalyst, MTG dehydrates methanol into dimethyl ether and then, over that same zeolite catalyst, rebuilds it directly and with high selectivity into gasoline-range hydrocarbons, water, and a small LPG stream, which is a narrower, more predictable product slate than FT’s broad spread of paraffins and waxes.
In the first step of MTG process, methanol is partially dehydrated to give dimethyl ether: 2 CH₃OH → CH₃OCH₃ + H₂O. This is then further dehydrated over a zeolite catalyst such as ZSM-5, and the process produces petrol with hydrocarbons of five or more carbon atoms.
The technology’s flagship commercial plant was built in New Zealand, conceived in the late 1970s when oil prices were running at $30 to $40 a barrel. Costing around $1.2 billion, the natural-gas-to-methanol-to-gasoline complex operated commercially from 1985 to 1997 before falling oil prices made it uneconomic, after which the facility reverted to producing methanol alone. It remains, to date, the only commercial MTG installation built with a Mobil-type catalyst outside China, where two further plants — JAMG-1, commissioned in 2009, and JAMG-2, added in 2016 were built.
MTG gasoline naturally contains durene, a high-melting-point aromatic compound that exceeds product specifications and must be isomerised in a dedicated “Heavy Gasoline Treatment” unit before blending. Today, only ExxonMobil and Denmark’s Haldor Topsoe hold rights to license MTG technology commercially, and Air Liquide has marketed its Lurgi MegaMethanol technology bundled with ExxonMobil’s MTG as an integrated gas-to-gasoline package for prospective licensees.
This is where the story of ethanol comes full circle. Instead of merely blending ethanol into petrol, with all the corrosion and blend-wall problems described above, what if the ethanol itself could be chemically upgraded into an actual drop-in hydrocarbon?
That is precisely the proposition behind Ethanol-to-Gasoline (ETG) technology developed at the US Department of Energy’s Oak Ridge National Laboratory (ORNL) and exclusively licensed in 2014 to California-based startup Vertimass. A proprietary catalyst converts ethanol — or, more broadly, a range of alcohols including butanol — directly into a hydrocarbon blend-stock in a single step, at relatively mild pressure and temperature, without needing any external hydrogen input, because the reaction itself releases sufficient hydrogen from within the ethanol molecule. The output is a genuine mix of petrol, diesel and jet-fuel-range hydrocarbons, alongside valuable BTEX aromatics (benzene, toluene, ethylbenzene and xylene) as a co-product.
Vertimass has been explicit that its catalyst works on ethanol regardless of whether it was fermented from corn in the United States, sugarcane in Brazil, or cellulosic biomass anywhere in the world — meaning that, in principle, it could be retrofitted onto India’s existing 1G, 2G and 3G ethanol distilleries to produce genuine drop-in hydrocarbons instead of an ethanol-petrol blend, sidestepping the blending limitations and vehicle-compatibility debate.
The honest caveat, by the company’s own description, is that the technology remains at the demonstration stage — “proven at small, integrated scale, but not yet commercially available” — rather than an operating commercial plant today.
Rather than starting from coal, gas or biomass, this approach starts from waste carbon dioxide itself — captured from industrial flue gas or, more ambitiously, directly from the air — and reacts it with hydrogen (ideally “green” hydrogen made via renewable-powered electrolysis) over a specialised catalyst to build gasoline-range hydrocarbon chains directly, turning a greenhouse gas liability into a fuel asset.
On the research frontier, a landmark 2017 study by scientists at China’s Dalian Institute of Chemical Physics and the University of Chinese Academy of Sciences designed a sodium- and iron-oxide-based catalyst that converted CO₂ and hydrogen into fuel-range hydrocarbons with 78 per cent selectivity, remaining stable for 1,000 hours while releasing very little unwanted methane. More recently, in 2022, chemical engineers at Stanford University’s Cargnello Lab reported a ruthenium catalyst coated in a thin, porous polymer layer that increased the yield of longer hydrocarbon chains like butane roughly a thousandfold compared with standard catalysts, by carefully controlling the carbon-to-hydrogen ratio at the catalyst’s surface to favour eight-to-twelve-carbon chains — precisely the range needed for petrol.
A few years earlier, researchers at the University of Illinois Chicago had used a molybdenum disulphide and ionic-liquid catalyst system to reduce CO₂ directly into syngas without a separate gasification step, offering a cheaper alternative to gold- or silver-based catalysts.
While single-step CO₂-to-gasoline remains largely at laboratory and pilot scale, a two-step version of the same underlying idea has already been proven industrially. Iceland’s Carbon Recycling International (CRI) has operated the George Olah Renewable Methanol Plant near Grindavík since 2012 — the world’s first industrial-scale facility converting captured CO₂ (drawn from a nearby geothermal power plant’s flue gas) and hydrogen from renewable-powered electrolysis directly into methanol via a mixed-metal-oxide catalyst, bypassing the intermediate carbon-monoxide step used in conventional methanol synthesis. The plant recycles roughly 5,500 tonnes of CO₂ a year into about 4,000 tonnes of renewable methanol — methanol that can then be run through the MTG process described earlier to produce genuine drop-in petrol.
Ordinary fast pyrolysis — rapidly heating biomass in the absence of oxygen — produces a “bio-oil” that is acidic, up to 50 per cent oxygen by weight, unstable, and difficult and expensive to upgrade into a usable fuel. Two related technologies tackle this problem in different ways.
Catalytic Fast Pyrolysis (CFP) places a zeolite catalyst directly inside the pyrolysis reactor, so that oxygen leaves the biomass as CO₂, carbon monoxide and water vapour during the reaction in a single step. US company Anellotech, founded in 2008 by University of Massachusetts Amherst chemical engineer Dr George Huber, commercialised this approach in a fluidised-bed reactor, converting non-food cellulosic biomass — palm waste, bagasse, corn stover, wood — directly into benzene, toluene and xylene (BTX) aromatics, which are valuable both as petrochemical building blocks and as high-octane gasoline-blending components. Anellotech’s Pearl River, New York pilot plant began operating in December 2013, and the company later partnered with IFP Energies Nouvelles, Axens and Johnson Matthey to co-develop the catalyst systems needed for commercial scale-up. More recently, Anellotech adapted the same reactor platform, rebranded Plas-TCat, to convert mixed post-consumer plastic waste into the same valuable olefins and aromatics, reaching Technology Readiness Level 6 in a 2022 continuous-processing trial.
Hydropyrolysis is another chemically distinct process, it injects hydrogen directly into the pyrolysis reactor itself, which removes essentially all of the oxygen from the biomass and yields a finished, stable hydrocarbon fuel rather than an aromatics-rich intermediate. The Gas Technology Institute (GTI) of Illinois invented this Integrated Hydropyrolysis and Hydroconversion process branded as IH2, and has partnered with Shell’s CRI/Criterion catalyst subsidiary, with Shell eventually taking exclusive worldwide licensing rights. IH2 is engineered to be self-sufficient in hydrogen, generating what it needs from light gases produced within the process itself, and it yields petrol and diesel containing less than 1 per cent residual oxygen and a heating value close to conventional fossil fuel — markedly better quality than either plain pyrolysis oil or catalytic-pyrolysis oil. Techno-economic analysis by the US National Renewable Energy Laboratory pegged the minimum selling price at around $2 a gallon for a 2,000-tonne-per-day woody-biomass facility.
India has a genuine stake in this technology: from 2010 to 2024, GTI and Shell Catalysts & Technologies jointly operated a 5-tonne-per-day IH2 demonstration facility at the Shell Technology Centre Bangalore, generating more than 30 process and catalyst patents from the India-based collaboration. GTI Energy now states the technology can also directly produce sustainable aviation fuel alongside gasoline and diesel, with greater than a 60 per cent reduction in greenhouse gas emissions relative to fossil fuel.
This technology must be clearly distinguished from the Fischer-Tropsch-based coal-to-liquid process discussed earlier, which is properly called “indirect” liquefaction because coal is first gasified into syngas before being rebuilt into hydrocarbons. Direct coal liquefaction skips gasification entirely: pulverised coal is mixed into a slurry, typically with a recycled oil solvent, and reacted directly with hydrogen gas at high temperature and pressure over a catalyst, breaking apart coal’s complex macromolecular structure and hydrogenating the fragments straight into liquid hydrocarbons.
The most significant modern example is China’s state-owned Shenhua Group, which built the Erdos direct coal liquefaction complex at Ejin Horo Banner in Inner Mongolia — the largest coal-to-liquids complex outside South Africa, with a design capacity of about 20,000 barrels a day. Construction began in 2004 using technology licensed from US firm Hydrocarbon Technologies Inc. and developed further in-house, and the roughly $2 billion plant became fully operational in November 2010, consuming about 10,000 tonnes of coal a day to produce roughly 3,000 tonnes of oil products — mainly diesel, naphtha and LPG.
However, Beijing curtailed its national CTL programme in 2008 over concerns about the technology’s very high water consumption and carbon emissions, allowing only a couple of pilot-scale projects, including the Erdos plant and an associated carbon-capture demonstration at the same site, to proceed. India has been named, alongside the US and Australia, among countries with large coal reserves that have periodically eyed coal-to-liquid technology as oil prices rise, but has not yet commissioned a commercial-scale plant of either the direct or Fischer-Tropsch variety, likely for similar water and emissions reasons.
Alcohol-to-Jet (ATJ) for aviation is a close cousin of the ETG idea above, purpose-built for jet fuel. US company LanzaJet’s proprietary ATJ technology converts ethanol — from agricultural residues, energy crops, municipal solid waste or captured carbon — into Synthetic Paraffinic Kerosene, a certified sustainable aviation fuel (SAF). In November 2025, LanzaJet’s Freedom Pines Fuels facility in Soperton, Georgia became the world’s first commercial-scale plant to produce jet fuel from ethanol, the result of fifteen years of development backed by the US Department of Energy and an investment exceeding $300 million.
The company has stated its technology is being deployed in several countries including India, alongside the US, Australia, Japan and the UK — a sign that Indian aviation could plug into this pathway even before any of India’s own ethanol distilleries acquire an ETG unit. LanzaJet notes this matters because the currently dominant SAF pathway, Hydroprocessed Esters and Fatty Acids (HEFA, made from used cooking oil and animal fats), is nearing a plateau in available feedstock, leaving alcohol-based routes as the more scalable long-term option.
Power-to-Liquid (PtL) e-fuels represent the most complete synthesis of everything covered in this article. Porsche, together with Siemens Energy and Chilean partner Highly Innovative Fuels, opened the Haru Oni pilot plant near Punta Arenas in southern Chile, a site chosen for wind that blows roughly 270 days a year. The plant splits water into hydrogen using wind-powered electrolysis, combines that hydrogen with CO₂ captured from the air to synthesise methanol, and then converts the methanol into genuine drop-in petrol using ExxonMobil’s MTG technology. In effect, Haru Oni physically links the CO₂-hydrogenation and methanol-to-gasoline chemistry described earlier into one working plant.
Officially opened in December 2022, the plant initially targeted about 130,000 litres of eFuel a year, with plans to scale towards roughly 55 million litres by the middle of the decade and 550 million litres a couple of years after that. Porsche has been candid that production costs remain around $2 a litre for now — a reminder that, as with several technologies in this article, cost, not chemistry, is the biggest hurdle to scale. Porsche frames eFuels as a way to decarbonise the more than 1.3 billion combustion-engine vehicles already on the world’s roads, rather than as a rival to electric vehicles.
Where India fits into this picture is still mostly on the policy drawing board rather than on the ground. India does not yet have a Haru-Oni-style PtL plant, but the National Green Hydrogen Mission, carrying a Central outlay of roughly ₹19,744 crore (about $2 billion), targets 5 million tonnes a year of domestic green hydrogen production capacity by 2030 —the raw ingredient every CO₂-hydrogenation and MTG-based e-fuel plant needs. NITI Aayog has for some years also floated a parallel methanol-blending roadmap alongside the ethanol programme, and Petroleum Minister Hardeep Singh Puri has confirmed that a NITI Aayog committee is actively examining pushing ethanol blending beyond 20 per cent, even as officials flag that bringing green hydrogen costs down from around $4.5/kg towards $2.5/kg or lower would be the real trigger for a domestic power-to-liquid industry.
Return, finally, to the three problems this article opened with. On food versus fuel, every technology described here — Fischer-Tropsch, MTG, ETG, direct CO2 hydrogenation, catalytic pyrolysis and hydropyrolysis, direct coal liquefaction, alcohol-to-jet and power-to-liquid — draws its carbon from coal, natural gas, agricultural and municipal waste, captured carbon dioxide and hydrogen, not from food products like sugar or maize. On vehicle compatibility, because the end product in every case is a genuine drop-in hydrocarbon, chemically indistinguishable from petroleum-derived petrol, diesel or jet fuel, there is no blend wall, no corrosion of rubber fuel lines, and none of the calorific-value mileage penalty that Indian motorists and the govt of India have been arguing over. A car running on synthetic petrol and a car running on petroleum petrol are, at the molecular level, running on the same thing.
And on the deepest problem of all is the crude oil itself, onshore discoveries have all but dried up, offshore exploration is being pushed into ever deeper and costlier water, and a country that imports the overwhelming majority of its crude cannot indefinitely outsource its fuel security to a market shaped by geopolitical shocks it does not control.
Synthetic fuel will not replace India’s 1G-to-4G ethanol programme overnight — cost remains the binding constraint across almost every technology. But it represents the logical next rung on the same ladder India has already begun climbing: converting whatever carbon is locally available — coal, gas, crop residue, municipal garbage, or eventually just captured CO₂ and renewable electricity — into the very fuel that be used directly used by engines.
From recent sugarcane controversies to the cutting edge of synthetic biology, discover why ethanol is a non-negotiable pillar of India’s energy security and how 1G, 2G, 3G, and 4G ethanol technologies actually work.
In this third and final part, we will unpack every single layer of India’s energy roadmap for the next 20 to 30 years.
This report explores the chemical and industrial shift behind India’s successful 20% ethanol blending (E20) target. It details the molecular benefits of ethanol, such as boosting petrol’s octane rating and reducing emissions.
Selected issues, clear explanations and thoughtful perspectives—delivered when we publish.
