Supreme Court Pauses Karnataka HC Directive On Ethanol Allocation Enhancement

The Supreme Court on Tuesday stayed an order of the Karnataka High Court that had directed oil marketing companies to consider enhancing ethanol allocation for the Ethanol Supply Year (ESY) 2025–26, marking a significant development in a dispute linked to India’s ethanol blending programme. The case has drawn attention due to its potential impact on the government’s broader policy of achieving 20 per cent ethanol blending in petrol.

A bench comprising Justices MM Sundresh and Sheel Nagu issued notice on a petition filed by Bharat Petroleum Corporation Limited (BPCL) challenging the High Court’s directive. The High Court had earlier instructed BPCL, along with Hindustan Petroleum Corporation Limited (HPCL) and Indian Oil Corporation Limited (IOCL), to examine a representation seeking increased ethanol allocation from a dedicated manufacturer for the 2025–26 supply year.

The High Court had observed that dedicated ethanol production units, established under government policy and contractually bound to supply only to oil marketing companies, could not be denied the benefit of preferential allocation under long-term supply agreements. The ruling effectively opened the door for reconsideration of allocation limits, triggering concerns among oil companies and policymakers.

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However, the Attorney General for India, R Venkataramani, argued before the Supreme Court that the High Court’s order could disrupt the national ethanol blending policy, which is still evolving. He stated that the 20 per cent blending target remains an ongoing implementation exercise and that its full impact will only become clearer over time. He also noted that ethanol supply contracts for the current cycle were finalised in October 2025.

According to the government’s submission, the allocation process for ESY 2025–26 had already been completed and communicated to 378 suppliers, with a total contracted supply of about 1,050 crore litres of ethanol. Of this, 680 crore litres had already been supplied by mid-June. Authorities cautioned that altering one supplier’s allocation could lead to similar claims from others, potentially resulting in widespread litigation and disruption of the established distribution framework.

In its appeal, BPCL argued that private suppliers such as VINP Distilleries cannot claim an absolute right to supply ethanol based solely on production capacity when allocations have already been finalised. The Supreme Court’s stay ensures that the existing allocation framework remains in place while the matter is examined further, keeping the focus on maintaining stability in India’s ethanol blending policy rollout.

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