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Ethanol Blending and Sugarcane Diversion in India
Food vs fuel: Surge in ethanol blending and its impacts
Context:
India is aiming to raise the ethanol blending ratio in petrol to 30% as part of its strategy to cut down on fossil fuel consumption.
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- This ambitious goal follows the country’s early achievement of its previous target of 20% ethanol blending in 2025, met ahead of schedule in March this year.
- However, to meet the new target, a greater share of sugar—derived mainly from sugarcane—will have to be diverted towards ethanol production, raising concerns about its availability for direct consumption and the potential for further price hikes.
From 1.5% to 20% Blending—and Beyond
- Launched in the early 2000s, the EBP originally set a target of 20% ethanol blending by 2030.
- Encouraged by progress—particularly a 15% blending ratio achieved by 2024—the government advanced the target year to 2025.
- As of March 2025, the target was officially met, prompting discussions around a new target of 30% ethanol blending in the coming years.
Sugarcane Strains Under Ethanol Demand
- India’s ethanol production has historically been dominated by sugarcane-derived feedstocks such as juice, syrup, and B-heavy molasses.
- Government restrictions on these inputs were lifted over the last decade, enabling a rapid surge in ethanol supply—from 40 crore litres in FY14 to nearly 670 crore litres in FY24.
- The ethanol blending ratio simultaneously grew from just 1.5% in FY14 to 20% in FY25.
- However, sugarcane production, which had been steadily increasing and peaked at 490 crore tonnes in FY23, has declined since then. It’s projected to fall to 435 crore tonnes in FY25, due to factors like: Red rot disease in major sugar-producing states, Deficient rainfall, and Poor crop flowering.
- To support farmers amid falling yields, the government recently approved a hike in the Fair Remunerative Price (FRP) for sugarcane. But the reduced output has tightened sugar availability, driving retail sugar prices up from ₹40 per kg in May 2023 to ₹45 per kg in May 2025.
- Ethanol diversion is further compounding this shortage, intensifying the food-versus-fuel dilemma.
Maize: The New Biofuel Star
- As sugarcane availability declines, the government has increasingly turned to grains like maize and rice to fill the ethanol demand. Maize, in particular, has emerged as a preferred feedstock due to its high starch content (68–72%), which is ideal for ethanol fermentation.
- Between 2022-23 and 2023-24, ethanol production from maize skyrocketed:
- Several factors are responsible for this decline:
- 2022-23: 0.8 million tonnes (mt) of maize yielded 31.51 crore litres of ethanol.
- 2023-24: 7.5 mt of maize produced 286.54 crore litres.
- 2024-25 projections: 484.35 crore litres of ethanol, requiring over 12.7 mt of maize.
- This diversion marks a fundamental shift. Until recently, India’s maize output (32–33 mt) exceeded its domestic demand (~28 mt). The latter included: 20 mt for livestock feed (15 mt poultry, 5 mt cattle), 5 mt for starch, 2 mt for direct human use, 1 mt for seeds and miscellaneous uses.
- However, biofuel demand has disrupted this balance. Maize prices have soared from ₹14,000–15,000/tonne to ₹24,000–25,000/tonne in just four years, largely due to the EBP.
- “The diversion of maize for biofuel has completely upset the demand-supply balance,” said Divya Kumar Gulati, Chairman of CLFMA (Compound Livestock Feed Manufacturers Association of India).
DDGS: A Boon for Feed, a Bane for Soyabean
- One byproduct of ethanol production from grains is Distiller’s Dried Grains with Solubles (DDGS)—a protein-rich material used in livestock feed. As ethanol output grows, so does DDGS supply:
- From maize: ~28–30% protein, priced at ₹16,000–17,000/tonne.
- From rice: ~45% protein, priced at ₹18,000–19,000/tonne.
- In 2024-25, ethanol from 12.7 mt of maize and 4 mt of rice is expected to yield over 5 million tonnes of DDGS. This abundance is pressuring traditional protein sources like soyabean de-oiled cake (DOC), which is now selling at ₹31,000–32,000/tonne, down by 30% over two years.
Feed Industry Seeks Policy Support, Import Flexibility
- The disruption in maize supply has hit poultry and dairy feed manufacturers especially hard, given maize makes up 55–65% of broiler feed, 50–60% of layer feed, and 15–20% of cattle feed. As domestic supply tightens, the industry is lobbying for liberalisation of maize imports.
- India currently permits 0.5 mt of maize imports annually at 15% duty, while quantities beyond that attract 50% duty.
- Additionally, genetically modified (GM) maize is not allowed for import.
- Of the 0.94 mt imported between April and January 2024-25, most came from Myanmar (0.51 mt) and Ukraine (0.39 mt)—countries that do not grow GM maize.
- This change would open up the Indian market to top global GM maize exporters like the US, Brazil, and Argentina, especially as China—formerly the biggest buyer—has scaled back its imports from them.
Finding a Sustainable Balance
- A source in the sugar industry emphasised the importance of a balanced approach: “The government may have to take a considered decision on permitting duty-free and GM maize imports. This might help poultry and dairy producers cope with rising feed costs, but the interests of our maize and soyabean farmers must also be protected.”
- A long-term solution lies in raising maize productivity and shifting acreage from water-guzzling rice to maize. Given rice’s surplus production and high water usage, diverting land from rice to maize could offer a more sustainable path to meet India’s growing fuel and feed needs.
