Revised 3 October 2026 · v1.0.0

India's ethanol and biodiesel programmes were built by notification: the National Biofuel Policy, the E20 roadmap, the oil marketing companies' (OMCs') annual tenders and the long-term offtake agreements that persuaded investors to build dedicated ethanol plants. Over the past two years the courts have started to test that structure. We read the judgments and orders, from the Supreme Court's nine-judge bench to the Karnataka High Court, and found four clear lines:

• the courts will not stop blending;
• the Constitution now gives States the regulatory hand over denatured alcohol;
• biodiesel is not a petroleum product;
• the OMCs' ethanol contracts can be reviewed by the courts.

The scorecard

1. E20: the Supreme Court will not stop blending

In Akshay Malhotra v. Union of India the petitioner did not oppose blending. He asked for:

• ethanol-free petrol (E0 or E10) for vehicles built before April 2023;
• labelling at fuel pumps;
• a study of E20's effect on older engines.

He relied on a 2021 NITI Aayog report and on consumer-choice rights. The Attorney General called him a "name-lender" for a lobby and argued that the policy helps cane farmers and saves foreign exchange. On 1 September 2025 the bench of Chief Justice Gavai and Justice Vinod Chandran dismissed the petition in two lines, without reasons.

2. The Constitution: States now hold the alcohol lever

State of U.P. v. Lalta Prasad Vaish & Sons (23 October 2024) overruled the 1990 Synthetics & Chemicals decision. Chief Justice Chandrachud wrote for eight judges.

• "Intoxicating liquor" in Entry 8 of the State List is not limited to drinks. It covers alcohol that could be "mischievously used", expressly including "rectified spirit, ENA and denatured spirit".
• The State's power runs "from the raw materials to the consumption".
• Parliament cannot take over this industry simply by declaring it under central control through the Industries (Development and Regulation) Act, 1951 (IDRA).

The majority never mentions fuel. Justice Nagarathna, dissenting, did: she described industrial alcohol as "liquid fuel to be blended with petrol" and used the blending programme's growth to argue for central control. She lost 8–1.

3. Ethanol contracts: the VINP case

In 2021 the OMCs invited investors to build dedicated ethanol plants (DEPs) in ethanol-deficit states. The plants would sell only to the OMCs under long-term offtake agreements (LTOAs):

• clause 6.2 promised a base quantity "on best endeavor basis";
• clause 6.8 said extra volume up to design capacity would come through "preferential allocation".

Tender 22376 for 2025–26 then said DEP volumes above the base quantity would not get preference. VINP Distilleries, a 300 KLPD plant in Haveri, bid 9.26 crore litres and was allotted 3.92 crore litres.

• Dec 2025 to Jan 2026: a single judge and then a Division Bench of the Karnataka High Court ordered the allotment revised in line with clause 6.8.
• 26 Feb 2026: the Supreme Court set both orders aside. Supplies were well under way (281 crore litres delivered), and courts "should remain circumspect and slow in passing interim orders which may have the effect of seriously impeding the execution of the tender." The Attorney General warned that a mandatory clause 6.8 would hand DEPs about 56% of the 1,050 crore litres. The merits were left open.
• 16 Jun 2026: Justice Nagaprasanna ruled for VINP. The OMCs are State instrumentalities with monopoly power, so "fairness and reasonableness are not matters of grace but constitutional obligation". The new tender term was a "bolt from the blue", and "Arbitrariness can never masquerade as discretion." The relief, though, was only an order to reconsider VINP's request within four weeks.
• 30 Jun and 4 Aug 2026: the Supreme Court ordered status quo, then approved, as an interim arrangement, an OMC proposal for Q4 allocation to all bidders (reported as 149 crore litres extra). It pulled similar cases from the Bombay (Nagpur) and Patna High Courts to itself. Hearing is set for 23 September 2026.

4. Biodiesel: not a petroleum product

In 2018 the Bombay High Court (My Eco Energy v. Union of India) held that biodiesel is not "petroleum" or a "petroleum product". So the 2005 Motor Spirit and High Speed Diesel Control Order, with its marketing-rights barrier of about ₹2,000 crore of investment, could not block biodiesel sales. The Centre answered with Biodiesel Sale Guidelines in April 2019. In 2023 a Nagpur bench (Abhay Rathi v. State of Maharashtra) applied the same logic to quash a criminal case over seized biodiesel. Neither the Essential Commodities Act nor the Petroleum Act applied.

The practical effect is that enforcement against fake "biodiesel" has to prove the product is really diesel, through lab testing. Simply calling biodiesel a controlled fuel is not enough.

What India can learn from the US credit cases

Our review of eight US rulings on biofuel credits found American courts deferring to the regulator on volumes but insisting on individualised, reasoned decisions when it grants or refuses relief to particular refiners. India is following a similar path. The Supreme Court leaves E20 and procurement totals to the government, while the Karnataka High Court demands fair, consistent treatment when the OMCs change terms on investors they recruited. As India moves to SAF and co-processing credits, the lesson is to write offtake and credit rules that are clear, apply prospectively, and are honoured through tender cycles.

What to watch

• The Supreme Court hearing on VINP and the transferred cases (listed 23 Sep 2026): whether clause 6.8 binds the OMCs, and whether LTOA disputes belong in writ courts or arbitration.
• State permit and fee rules on fuel ethanol after Lalta Prasad Vaish, and the first challenges to them.
• Consumer-forum cases on E20 engine damage and pump labelling.
• Whether the Centre brings biodiesel under a statutory framework instead of guidelines.

Sources: Supreme Court of India: State of U.P. v. Lalta Prasad Vaish & Sons, [2024] 10 S.C.R. 1931 : 2024 INSC 812 (full text via Legal Data Hunter); W.P.(C) 813/2025, record of proceedings 1 Sep 2025; SLP(C) 7799/2026 order of 26 Feb 2026 (as recited in the Karnataka HC judgment); orders of 4 Aug 2026 in SLP(C) 22963/2026 and T.P.(C) 1924–1925/2026. Karnataka High Court: WP 109133/2025, judgment of 16 Jun 2026. Bombay High Court: WP 1556/2016 (Nov 2018, from press reports); Crl. Appl. 555 & 695/2022, 2023:BHC-NAG:13366-DB (from case note). News: LiveLaw (1 Sep 2025), LiveLaw Biz (30 Jun 2026), Business Standard (12 Mar and 5 Aug 2026). Page and paragraph references are to the copies read. This is a summary of public court records, not legal advice.

About this article: Researched, written and edited by Umashankar Triplicane Dwarakanathan, with AI research assistance; every figure is meant to trace to the primary source cited. See the Editorial Policy for how sourcing, AI use and corrections work.