India’s Ethanol Revolution Driven by Grains – Explained

Ethanol Revolution Latest News

• India’s ethanol blending programme has undergone a major shift, with grain-based ethanol, especially from maize, surpassing sugarcane-based production for the first time, marking a structural change in the country’s biofuel strategy.

Evolution of India’s Ethanol Blending Programme

• India’s ethanol blending programme (EBP), launched to reduce crude oil imports and support sugarcane farmers, has undergone a remarkable transformation. 
• Initially conceived to enable sugar mills to generate additional revenue and make timely payments to cane growers, the programme has evolved into a multi-feedstock ethanol industry powered largely by grains, especially maize and rice.
• This shift marks a major structural change in India’s biofuel policy. What began as a sugarcane-linked project is now driven by grain-based distilleries, which have received over Rs. 40,000 crore in investments, reshaping the dynamics of rural industry, fuel policy, and agricultural markets.

‹ ›

Sugarcane as the Foundation

• Ethanol production in India began through the fermentation of sucrose from molasses, a by-product of sugarcane processing. 
• Until 2017-18, sugar mills mainly used C-heavy molasses, the final by-product of sugar extraction. 
• However, the introduction of higher procurement prices for ethanol made from B-heavy molasses and direct cane juice or syrup encouraged mills to divert cane from sugar production to ethanol.
• Between 2013-14 and 2018-19, ethanol supplies to oil marketing companies (OMCs) surged from 38 crore litres to nearly 189 crore litres, raising the average blending rate from 1.6% to 4.9%. 
• The policy was hailed as a success in stabilising the sugar sector, especially during periods of price volatility and excess production.

The Shift from Sugar to Grain

• Starting from the 2018-19 fiscal year, the government allowed ethanol production from grains such as maize, rice, and damaged foodgrains, setting differential ex-distillery prices for each. 
• Initially, this was meant to help sugar mills operate their distilleries year-round by using grains during the off-season (May-October).
• However, with attractive pricing and flexible feedstock regulations, standalone grain-based ethanol plants began proliferating across India, particularly in Punjab, Haryana, Bihar, Andhra Pradesh, Madhya Pradesh, Maharashtra, Karnataka, Rajasthan, and Chhattisgarh.
• By 2023-24, this transition became strikingly visible. Out of the 672.49 crore litres of ethanol supplied to OMCs, only 270.27 crore litres (40.2%) came from sugarcane-based sources, while 402.22 crore litres (59.8%) were grain-based, mostly maize and broken rice.

Maize Becomes the Mainstay

• The current 2024-25 ethanol supply year reflects the dominance of grains. Out of the 920 crore litres likely to be procured, about 620 crore litres are expected to come from grain-based sources, with maize contributing nearly 420 crore litres.
• Two main factors explain this shift:
• Reduced Sugarcane Availability: Droughts in 2023-24 and 2024-25 hit sugarcane production, prompting the government to restrict ethanol derived from cane juice and B-heavy molasses to safeguard sugar supplies for domestic consumption.
  • Sugar diverted for ethanol fell from 45 lakh tonnes in 2022-23 to 24-35 lakh tonnes in the subsequent two years.
  • Sugar production declined from 359 lakh tonnes (2021-22) to an estimated 261 lakh tonnes (2024-25).
• Pricing Advantage: Ethanol from maize fetches Rs. 71.86 per litre, compared to Rs. 57.97 from C-heavy molasses, Rs. 60.73 from B-heavy, and Rs. 65.61 from cane juice/syrup. This made maize ethanol more lucrative for distillers.

Growth, Capacity and Policy Implications

• For 2025–26, OMCs invited tenders for 1,050 crore litres of ethanol to achieve the 20% blending target, but received offers totalling 1,776 crore litres, far exceeding requirements. Of this, 1,304 crore litres were from grain-based sources, mainly maize and FCI rice.
• Currently, India has 499 operational distilleries with a combined production capacity of 1,822 crore litres annually. 
• The massive expansion, driven by private and cooperative investment, shows the sector’s potential but also raises policy challenges.

Challenges and Sustainability Concerns

• Excess Production Capacity
  • With ethanol demand capped by blending limits (20% being the technical ceiling for current vehicles), the sector faces a looming oversupply risk. Balancing production capacity and consumption will require strategic planning to avoid price distortions.
• The Food vs. Fuel Debate
  • India’s ethanol policy now faces the global dilemma of diverting food grains for fuel. Producing 420 crore litres of ethanol from maize consumes about 11 million tonnes of grain, roughly 26% of India’s total maize output (42 mt).
  • Since maize is a critical input for poultry, dairy, and livestock feed, rising ethanol demand could pressure feed costs and food inflation.
  • Similarly, ethanol from rice depends on surplus stocks held by the Food Corporation of India (FCI), which may not persist every year.
• Environmental Considerations
  • While ethanol is a cleaner-burning fuel that reduces greenhouse gas emissions, large-scale grain diversion raises sustainability concerns related to water use, land allocation, and fertiliser intensity, particularly in maize cultivation.

Government’s Future Strategy

• To ensure balance, the government is likely to adopt a dual-feedstock policy, encouraging both sugarcane and grain-based ethanol while closely monitoring the food security implications. 
• Efforts are also underway to develop second-generation (2G) biofuels using agricultural residues like paddy straw, which could help achieve the 20% blending target by 2025-26 sustainably.
• The government’s continued focus on ethanol reflects its commitment to energy transition, rural income diversification, and reducing crude oil imports, which cost over $160 billion annually.

Source: IE