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The government has implemented a new policy to use petrol blended with ethanol.The “Directive on the Use of Ethanol Blended in Petrol, 2082 (2025/26)” issued by the Cabinet was published in the Nepal Gazette on Friday. Through this directive, the government aims to promote industries based on domestic raw materials, create employment, increase the use of agricultural and biological resources, and reduce dependence on energy imports.

According to the policy, the Nepal Oil Corporation must blend up to a maximum of 10 percent ethanol per liter of petrol depending on availability. The Cabinet may increase or decrease this proportion as required.

Raw materials that can be used to produce ethanol include molasses, Napier grass, unused agricultural and forest biomass, straw, corn cobs, wheat husk, simal tuber, rotten grains, yeast culture (marcha), and other necessary chemicals. To prevent misuse of food grains, grains normally used as food will not be allowed for ethanol production.

Industries must produce ethanol only from the specified raw materials according to prevailing laws, and the ethanol produced must be sold exclusively to the Nepal Oil Corporation. This policy clearly limits ethanol use to blending with petrol while keeping the market regulated.

The directive states that industries must adopt environmentally friendly production processes, maintain quality standards, and conduct quality testing through their own laboratories. The Nepal Oil Corporation will also test the quality of every tanker before purchasing.

The price of ethanol will be determined by the government based on recommendations from a designated committee before the start of each fiscal year. If a new price is not set, the previous year’s price will remain in effect. The determined price will take effect from the first day of the Nepali month of Shrawan each year.

The Nepal Oil Corporation must sign purchase agreements with industries for ethanol supply, and industries must provide the required daily quantity at the specified location and time. If industries violate the agreement, compensation can be claimed according to prevailing laws.

Responsibility for transporting ethanol lies with the industries. Since ethanol is highly flammable and absorbs water easily, strict safety standards must be followed during transportation. The ministry will prepare and implement standards for safe storage, blending, and transportation.

The government has formed a committee to recommend ethanol pricing and industry incentives. The committee will be chaired by the Secretary of the Ministry of Industry, Commerce and Supplies and will include representatives from the Ministry of Finance, Ministry of Agriculture, the Department of Quality and Metrology, the Nepal Academy of Science and Technology, and the Nepal Oil Corporation.

The committee will also recommend policies related to raw material costs, tax exemptions, incentives, recognition as a national priority industry, tax relief on equipment imports, support for farmers and agricultural cooperatives such as fertilizers and seeds, and possible electricity tariff concessions.

Through this policy, the government expects increased use of agricultural residues and biological resources, establishment of new industries, and job creation in rural areas. However, the effectiveness of implementation will depend on industrial capacity, availability of raw materials, and government regulation.