The Supreme Court on Tuesday directed maintenance of the status quo with respect to ethanol supply allocation for the Ethanol Supply Year (ESY) 2025-26 in a dispute arising from judicial intervention in the implementation of the national Ethanol Blended Petrol (EBP) programme.
The Vacation Bench of Justice MM Sundresh and Justice Sheel Nagu passed the interim order after hearing Attorney General R Venkataramani, appearing for Bharat Petroleum Corporation Limited (BPCL), and Senior Advocate Siddharth Dave for the respondents. The Court issued notice and ordered that the existing allocation framework under the procurement cycle be preserved pending further consideration.
The Attorney General assailed a Karnataka High Court order which had directed Oil Marketing Companies (OMCs) to consider and decide a representation made by a dedicated ethanol producer seeking enhancement of its ethanol allocation for ESY 2025–26. It was submitted that the impugned direction interfered with a concluded procurement process under the Long Term Offtake Agreement (LTOA) mechanism and could adversely impact the implementation of the Centre’s policy objective of achieving 20 per cent ethanol blending in petrol under the E20 programme.
During the hearing, the Bench queried why the petitioner had not approached the Division Bench of the High Court. The Attorney General submitted that ethanol supply contracts for ESY 2025–26 had been finalised in October 2025 under the centralised procurement framework, and that similar challenges were pending before multiple High Courts, thereby necessitating adjudicatory consistency through transfer proceedings. He sought liberty to file appropriate transfer petitions before the Supreme Court to avoid multiplicity of litigation and conflicting judicial orders.
The dispute originates from proceedings instituted by M/s VINP Distilleries and Sugars Private Limited, a Dedicated Ethanol Plant (DEP) operating within the regulatory framework of the National Policy on Biofuels, 2018 and the EBP procurement structure. The petitioner had challenged the reduction in its ethanol allocation despite having established a dedicated production facility pursuant to an Expression of Interest (EOI) and subsequent Long Term Offtake Agreement with Oil Marketing Companies.
It was the case of the petitioner that the plant had an installed annual production capacity of approximately 9.90 crore litres and had bid for supply of 9.26 crore litres for ESY 2025–26. However, only 1.44 crore litres were ultimately allocated, leading to alleged arbitrariness and deviation from contractual expectations.
Opposing the writ petition before the High Court, the Attorney General had submitted that preferential allocation norms and “best endeavour” clauses under the procurement agreement do not confer an enforceable right capable of being enforced through a writ of mandamus under Article 226 of the Constitution. It was further argued that any direction for reconsideration of allocation would amount to judicial interference in policy formulation and contractual implementation, effectively modifying the procurement regime, which is impermissible in law.
The Karnataka High Court, however, allowed the writ petition, holding that the petitioner had a legitimate expectation arising from the contractual framework and the consistent past conduct of Oil Marketing Companies under the LTOA regime. It observed that Dedicated Ethanol Plants, which operate under exclusivity clauses restricting them from supplying ethanol to third parties or engaging in alternative production, cannot be placed at a disadvantage due to altered allocation methodologies, as such action would result in manifest arbitrariness and commercial prejudice.
The High Court further held that the petitioner was entitled to issuance of a writ of mandamus directing the OMCs to act in accordance with Clause 6.8 of the agreement, particularly in light of the fact that the clause had previously been invoked by the OMCs themselves to enhance procurement from 1.44 crore litres to 3.92 crore litres.
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