Explanation:

Ethanol blending is the practice of blending petrol with ethanol. Many countries, including India, have adopted ethanol blending in petrol in order to reduce vehicle exhaust emissions and also to reduce the import burden on account of crude petroleum from which petrol is produced. It is estimated that a 5% blending (105 crore litres) can result in replacement of around 1.8 million Barrels of crude oil .
The renewable ethanol content, which is a by product of the sugar industry, is expected to result in a net reduction in the emission of carbon dioxide, carbon monoxide (CO) and hydrocarbons (HC). Ethanol itself burns cleaner and burns more completely than petrol it is blended into. In India, ethanol is mainly derived by sugarcane molasses, which is a by-product in the conversion of sugar cane juice to sugar.
The practice of blending ethanol started in India in 2001. Government of India mandated blending of 5% ethanol with petrol in 9 States and 4 Union Territories in the year 2003 and subsequently mandated 5% blending of ethanol with petrol on an all-India basis in November 2006 (in 20 States and 8 Union Territories except a few North East states and Jammu & Kashmir).
This was also an attempt to reduce the Under-recovery of Public Sector Oil Marketing Companies (OMCs). Ministry of Petroleum and Natural Gas, on 1 September, 2015, inter-alia has asked OMCs to target ten percent blending of ethanol in Petrol in as many States as possible. In countries like US, blending is allowed upto 10%. Subsequent to Brazil's bio-fuel programme, which began in 1976, close to 94% of cars sold in Brazil are flexible fuel cars that can handle ethanol blends from 18 per cent upward .
Ethanol blending first found mention in the Auto fuel policy of 2003. It suggested developing technologies for producing ethanol/ bio fuels from renewable energy sources and introducing vehicles to utilise these bio fuels. Later, as per National Policy on Bio-fuels, announced in December 2009, oil companies were required to sell petrol blended with at least 5% of ethanol. It proposed that the blending level be increased to 20% by 2017.