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Grain-based ethanol: Fuelling India’s energy transition and rural economy

As India races toward a sustainable energy future, grain-based ethanol has emerged as a critical driver of its ambitious Ethanol Blending Programme. This initiative, championed by the Government of India, aims to achieve 20% ethanol blending in petrol by 2025-26, reducing the country’s dependence on fossil fuel imports, addressing environmental challenges, and empowering rural economies. While milestones have marked the journey, the grain-based ethanol sector finds itself at a crossroads, confronting complex challenges that require decisive action and visionary policy reforms. 

The growing role of ethanol in India’s energy landscape 

India’s reliance on fossil fuels has long been a challenge for its energy security, with crude oil imports accounting for a significant portion of the nation’s foreign exchange outflow. As of 2024, fossil fuels supply 98% of energy for road transportation, with biofuels like ethanol making up a mere 2%. The Ethanol Blending Programme aims to alter this equation by increasing the use of domestically produced ethanol. 

The journey toward achieving the blending target has been remarkable. In 2014, ethanol blending in petrol stood at a modest 1.53%. This has risen to over 13% in the current Ethanol Supply Year (2023-24). The transition has delivered substantial economic benefits, with the program saving India ₹1,06,072 crore in foreign exchange over the past decade. By replacing 181 lakh metric tons of crude oil, ethanol has also cut carbon dioxide emissions by 544 lakh metric tons, aligning with India’s net-zero emissions target for 2070. 

The government’s focus on achieving 20% ethanol blending by 2025-26 is projected to displace 1,016 crore litres of petrol annually, saving $4 billion. These figures underscore the transformative potential of ethanol in reducing India’s energy import dependence while driving environmental sustainability. 

Shift to grain-based ethanol 

Historically, ethanol production in India has been dominated by sugarcane-based sources. However, the limitations of this approach—capped production capacity and high water usage—have necessitated the exploration of alternatives. Grain-based ethanol, derived primarily from maize and surplus food grains, offers a viable and sustainable solution. 

Maize has been identified as a strategic feedstock due to its high ethanol yield per ton and lower water requirements compared to sugarcane and rice. Yet, India’s current maize production of 37.6 million metric tons is insufficient to meet the ethanol industry’s growing needs alongside existing demands from sectors such as animal feed, starch production, and brewing. More than 95% of maize is already pre-allocated, leaving little for ethanol producers. 

To bridge this gap, the government has facilitated the temporary use of surplus and damaged rice stocks from the Food Corporation of India (FCI). These stocks, unfit for human consumption, have provided a critical lifeline for ethanol manufacturers, stabilizing production while alleviating pressure on maize supplies. However, this is a temporary solution that requires long-term strategies to expand maize production and improve feedstock availability.  

Economic empowerment through ethanol production 

The grain-based ethanol sector is not just an energy initiative—it is a socioeconomic catalyst. The rising demand for maize has significantly benefited farmers, with prices increasing from ₹12-14 per kilogram to ₹23-24 per kilogram in recent years. This price surge has directly enhanced rural incomes, providing a much-needed boost to farmers’ livelihoods. 

In addition to improving farmgate earnings, the ethanol industry has emerged as a key employment generator in rural areas. From supply chain logistics to ethanol production facilities, the sector has created numerous job opportunities, aligning with national objectives such as “Make in India” and the Doubling Farmers’ Income initiative. 

Challenges facing the grain-based ethanol sector 

Despite its potential, the grain-based ethanol industry is grappling with several challenges that threaten its growth and viability: 

  1. Feedstock Shortages: The inadequate availability of maize remains a significant hurdle. With most of the nation’s maize output already consumed by other industries, ethanol manufacturers are forced to rely on limited surplus stocks, creating supply bottlenecks.
  2. Pricing Discrepancies: While the minimum support price (MSP) for maize and rice has increased, ethanol procurement prices have not kept pace. This mismatch strains the financial viability of ethanol manufacturers, particularly young entrepreneurs driving innovation in the sector.
  3. Scaling Production: To meet the 20% blending target, ethanol production capacity must expand to 1,700 crore liters, requiring significant investments in infrastructure and operational efficiency.
  4. Policy Gaps: Fragmented and static policy frameworks fail to address the dynamic needs of the industry. A cohesive regulatory environment is essential to support sustained growth.

Addressing food security concerns 

Critics of grain-based ethanol often raise concerns about its impact on food security. However, data reveals that these fears are largely unfounded. The industry predominantly relies on surplus and damaged food grains—stocks that are unsuitable for human consumption. For instance, of the 540 lakh metric tons of surplus rice held by FCI, only 23 lakh tons have been allocated for ethanol production, leaving ample reserves for food supply. 

Furthermore, as maize production expands, the industry’s reliance on surplus grains will diminish, creating a more balanced ecosystem. This dual focus on ensuring food availability and meeting ethanol demand underscores the sector’s commitment to equitable resource allocation. 

Strategic recommendations for growth 

To unlock the full potential of the grain-based ethanol industry, targeted interventions are imperative: 

  • Scaling Maize Cultivation: Farmers must be incentivized through subsidies, technology access, and assured procurement prices to expand maize production.
  • Revising Procurement Prices: Ethanol prices should be adjusted to reflect rising input costs, ensuring financial sustainability for manufacturers.
  • Strengthening Supply Chains: Investments in logistics and storage infrastructure will enhance feedstock management and reduce operational inefficiencies.
  • Encouraging Innovation: Research and development in ethanol production technologies can optimize yields and reduce costs, making the industry globally competitive.
  • Policy Alignment: A unified regulatory framework that addresses feedstock availability, pricing, and production capacity is crucial for sustained growth.

The road ahead 

The grain-based ethanol industry represents a unique opportunity for India to harmonize its energy, economic, and environmental priorities. By reducing dependence on fossil fuels, empowering farmers, and fostering rural employment, this sector is poised to drive transformative change across multiple dimensions. 

However, the path forward is not without challenges. Feedstock constraints, pricing mismatches, and policy gaps must be addressed with urgency and precision. The stakes are high, but so is the potential for impact. India’s ethanol journey is a testament to its resilience and ingenuity. With the right support and strategic focus, the grain-based ethanol industry can fuel not just vehicles but the aspirations of a nation striving for energy independence, economic empowerment, and environmental stewardship. 

 

Sugar Times Team
Sugar Times Teamhttps://www.sugartimes.co.in
The Sugar Times Editorial Team is a group of experienced journalists, analysts, and industry experts dedicated to providing in-depth coverage and insights on the global sugar industry. With years of experience in agriculture, trade, sustainability, and market trends, the team brings a wealth of knowledge and expertise to every article they produce.Focused on delivering accurate, timely, and relevant news, the Sugar Times Editorial Team aims to keep industry professionals, stakeholders, and enthusiasts informed on key developments in sugar production, trade policies, innovations, and sustainable practices. Their collective goal is to help readers navigate the complexities of the sugar sector and stay ahead of emerging trends shaping the future of the industry.You may submit your article on info@sugartimes.co.in if you have valuable contributions for the industry readers.
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