India’s Shift to Grain-Based Ethanol: Food and Water Security Concerns

India’s ethanol programme is undergoing a major structural shift. Originally designed to support the sugar industry and sugarcane farmers, it is increasingly dependent on grain-based ethanol, particularly from maize and rice.

This shift has helped India move towards E20, but also raises concerns over food security, water stress and sustainable feedstock availability, especially as sugar stocks tighten, maize faces climate risks and FCI rice is increasingly used for ethanol.

Why Was the Ethanol Programme Introduced?

The Ethanol Blended Petrol (EBP) Programme was initially intended to address problems in the sugar sector while strengthening India’s energy security.

• Support sugar mills: Ethanol provides sugar mills with an additional revenue stream when sugar production exceeds market demand.
• Ensure timely cane payments: Additional ethanol revenue improves mill liquidity and helps sugar mills make timely payments to sugarcane farmers.
• Manage sugar surplus: Diverting part of sugarcane towards ethanol reduces surplus sugar production and helps stabilise the sugar market.
• Reduce crude oil dependence: Blending domestic ethanol with petrol reduces the requirement for imported petroleum and strengthens energy security.
• Create an agricultural market: The programme has also created additional demand for crops such as maize, which is traditionally used for poultry and livestock feed.

How Did India Shift to Grain-Based Ethanol?

India’s shift to grain-based ethanol took place as the government expanded the feedstock base and ethanol demand increased.

• Until 2017-18, ethanol supplied to oil marketing companies came almost entirely from C-heavy molasses, a by-product of sugar production.
• From 2018-19, mills were encouraged to use B-heavy molasses and sugarcane juice/syrup for ethanol, which increased the quantity of sugarcane diverted towards fuel.
• Grains initially entered as an off-season feedstock, with sugar mills using maize and rice during May-October, when sugarcane was not available for crushing.
• Standalone grain distilleries later expanded, allowing ethanol production from maize and rice throughout the year rather than depending on the sugarcane crushing season.
• Rising ethanol blending targets increased demand for grain-based ethanol, while high sugar prices and lower sugar stocks reduced the scope for diverting sugarcane juice and B-heavy molasses.
• The result was a sharp reversal in the feedstock mix. Sugarcane-based feedstock supplied over 83% of ethanol in 2021-22, but grains accounted for 59.7% in 2023-24 and 72.5% of allocated ethanol for the supply year ending October 2026.

Thus, grains have evolved from a supplementary off-season feedstock into the mainstay of India’s ethanol programme.

What Are the Concerns with the Shift to Grain-Based Ethanol?

The growing dependence on grains for ethanol is creating new pressures on food security, agricultural markets, water resources and sustainable feedstock availability.

• Using food grains for ethanol can intensify the food-versus-fuel trade-off, as maize and rice are also required for food consumption, poultry and livestock feed.
• Rising ethanol demand can put pressure on maize supplies, as it has created a major new source of demand alongside poultry and livestock feed. Wholesale maize prices rose from around ₹13.8-17.8 per kg in 2021 to ₹22.1–24.5 per kg in 2024.
• Greater reliance on ethanol can increase dependence on Food Corporation of India rice, particularly if maize supplies tighten and sugarcane-based ethanol remains constrained.
• Diversion of Food Corporation of India rice raises questions about its opportunity cost, as rice used for ethanol cannot simultaneously serve as food, animal feed or a buffer against future shortages. Food Corporation of India rice was supplied to distilleries at around ₹23.2 per kg, compared with about ₹40 per kg for normal rice and ₹30 per kg for broken rice in the retail market.
• Greater dependence on rice can worsen water stress, as rice is a water-intensive crop and rising demand for it as an ethanol feedstock can reinforce water-intensive cropping patterns.
• Dependence on a few feedstocks increases climate vulnerability, as weather shocks affecting maize or other major crops can directly affect ethanol availability.
• Rapid expansion of ethanol capacity can increase pressure on agricultural feedstocks, with capacity nearing 2,000 crore litres against annual offtake of around 1,050 crore litres by oil marketing companies.
• Ethanol production can also reduce the sugar available for consumption, because some sugarcane is diverted towards ethanol instead of being converted into sugar. This diversion was 2.2 million tonnes in 2020-21, 4.3 million tonnes in 2022-23 and 3 million tonnes in 2025-26, showing that ethanol production can significantly affect the sugar supply.

Thus, the shift to grain-based ethanol may reduce dependence on sugarcane, but it also transfers pressure towards India’s food, feed and water resources.

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What Is the Central Policy Dilemma?

The issue now is not whether ethanol blending should be promoted, but how rapidly it should be expanded without creating unsustainable pressure on agricultural resources.

• Achieving E20 requires around 1,050 crore litres of ethanol annually, creating substantial and sustained demand for feedstocks.
• The government has already notified standards for E22, E25, E27 and E30, indicating the possibility of progressively higher blending in the future.
• Higher blending targets should be linked to the availability of sustainable feedstocks, rather than being driven primarily by installed distillery capacity.
• The benefits of reducing fossil-fuel dependence must be balanced against the competing demands on food grains, land and water.
• Consolidating E20 while developing alternative feedstocks and second-generation ethanol could reduce pressure to divert increasing quantities of food grains.

The central challenge is to expand ethanol blending without compromising India’s food and water security.

What Should India Do?

India needs to move from a target-driven ethanol strategy towards a diversified and resource-efficient feedstock strategy.

• Reduce excessive dependence on FCI rice: Public food stocks should be diverted to ethanol only when they are genuinely surplus after accounting for food-security requirements.
• Use maize within sustainable limits: Rising ethanol demand should not undermine maize availability for poultry, livestock feed and other essential uses.
• Promote bajra and jowar: Millets offer alternative feedstocks, with their grains containing around 58-62% recoverable starch and yielding approximately 380-400 litres of ethanol per tonne.
• Link ethanol with crop diversification: Encouraging less water-intensive feedstocks can reduce pressure on rice and sugarcane while creating additional markets for millet farmers.
• Promote second-generation ethanol: Agricultural residues and other lignocellulosic biomass can produce ethanol without directly competing with food crops.
• Adopt region-specific feedstock planning: Ethanol production should reflect local water availability, agro-climatic conditions and crop suitability rather than relying uniformly on rice, maize or sugarcane.
• Avoid capacity-driven blending targets: Expansion of distillery capacity should not by itself become a reason for continuously raising blending targets.
• Increase blending gradually: The pace of blending should remain aligned with the availability of sustainable and diversified feedstocks.
• Reassess the pace of expansion: Chief Economic Adviser V. Anantha Nageswaran has suggested returning to E10, highlighting the need to examine whether higher blending should be pursued at the current pace.

Conclusion

India’s shift to grain-based ethanol has strengthened energy security but has also created new pressures on food grains, water and agricultural resources. The way forward is to diversify feedstocks, expand 2G ethanol and align blending targets with sustainable resource availability.