Context: India's Ethanol Blended Petrol (EBP) Programme, initially designed to support sugar mills and cane farmers, is increasingly becoming dependent on grain-based ethanol, raising concerns over food security, water use and the sustainability of higher blending targets.
From Sugarcane to Grains: Changing Feedstock Pattern
- Until 2017–18, almost all ethanol supplied to Oil Marketing Companies (OMCs) came from C-heavy molasses, the final by-product of sugar processing after maximum economically viable sugar recovery.
- Since 2018–19, mills increasingly shifted to B-heavy molasses and direct sugarcane juice/syrup, because the government offered higher ethanol prices for these routes; less sucrose was crystallised as sugar and more was converted into ethanol.
- Ethanol supply to OMCs increased from 38 crore litres in 2013–14 to 190 crore litres in 2018–19, while average ethanol blending rose from 1.6% to 4.9%.
- The major transformation came with cereal-based ethanol, involving conversion of grain starch into sugars followed by fermentation, distillation and dehydration to produce fuel-grade ethanol.
- Initially, sugar-mill distilleries used molasses/juice during the crushing season (November–April) and grains during the off-season; subsequently, standalone grain-based distilleries expanded rapidly.
Growing Dominance of Grain-Based Ethanol
- In 2023–24, ethanol supply reached 673 crore litres, enabling an average blending rate of 14.6%; grain-based feedstock alone contributed 402 crore litres (59.7%).
- Even in 2021–22, when average blending crossed 10%, sugarcane-based feedstock contributed over 83% of ethanol; the balance has now sharply shifted towards grains.
- For the supply year ending October 2026, OMCs allocated about 1,048.3 crore litres of ethanol, of which 759.8 crore litres (72.5%) is grain-based and only 288.5 crore litres (27.5%) sugarcane-based.
- Thus, the EBP programme has moved from sugarcane-led ethanol to grain-led ethanol, reversing its original feedstock structure.
The Rice Problem
- For 2025–26, the government allocated 5.2 million tonnes (mt) of surplus Food Corporation of India (FCI) rice to ethanol distilleries, later increasing it to 7.2 mt.
- At roughly 450–460 litres of ethanol per tonne of rice, 7.2 mt of rice can produce around 325–330 crore litres of ethanol.
- If sugarcane diversion and maize availability both become constrained, sustaining E20 (20% ethanol blending) could require allocating even more FCI rice.
- This is problematic because rice is highly water-intensive, making large-scale diversion of rice to fuel potentially inconsistent with water and food-security objectives.
- FCI rice is reportedly sold to distilleries at around ₹23.2/kg, while the reserve price for 100% broken rice is around ₹21/kg, compared with market prices of roughly ₹40/kg for normal rice and ₹30/kg for broken rice.
Why Grain Dependence Is a Concern
- The original EBP objective was to improve sugar-mill liquidity and enable timely payments to sugarcane farmers, while also creating additional demand for maize.
- Ethanol demand helped raise wholesale maize prices from around ₹13.8–17.8/kg in 2021 to ₹22.1–24.5/kg in 2024, benefiting maize farmers but increasing costs for poultry and livestock feed.
- Greater use of food grains for ethanol creates a food-versus-fuel trade-off, particularly when stocks are low or agricultural production is affected by weather.
- With sugar prices high and sugar stocks projected to be at a 17-year low, significant diversion of sugarcane juice or B-heavy molasses towards ethanol may further tighten sugar availability.
Can E20 and Higher Targets Be Sustained?
- To achieve E20 nationally, around 1,050 crore litres of ethanol are required; the current allocation is already close to this level.
- The government has also notified standards for E22, E25, E27 and E30, but achieving progressively higher targets would require substantially more feedstock.
- India's aggregate ethanol production capacity has risen to nearly 2,000 crore litres, compared with only 421 crore litres in 2014, creating pressure to maintain high utilisation of distilleries.
- Future feedstock availability is uncertain because of possible constraints in sugarcane and maize production, including weather-related risks such as El Niño.
Way Forward
- Reduce dependence on standalone grain-based distilleries, particularly those heavily dependent on subsidised FCI rice, and encourage feedstocks that consume less water.
- Promote millets such as bajra and jowar as ethanol feedstock; their grains contain about 58–62% recoverable starch and can yield around 380–400 litres of ethanol per tonne, comparable to maize.
- This can simultaneously create a new market and better realisations for millet farmers, supporting crop diversification and water conservation.
- Avoid prematurely increasing blending targets merely to utilise expanding distillery capacity; the EBP programme has demonstrated success even at 10–15% blending.
- A gradual approach, including reconsideration of the E10 (10% blending) target, would reduce pressure on food grains, sugar and agricultural resources while allowing feedstock availability to determine the pace of expansion.
