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India’s ethanol blending programme, originally launched to reduce oil imports and stabilise the sugar industry, is undergoing a transformative shift. What began as a sugarcane-centric initiative has evolved into a grain-based ethanol ecosystem, reflecting structural changes in agricultural markets, energy policy, and rural industrialisation. For the first time, grain-derived ethanol—predominantly from maize—has surpassed sugarcane-based production, marking a pivotal moment in India’s biofuel sector.

Evolution of Ethanol Blending

The Ethanol Blending Programme (EBP) was initially designed to create additional revenue streams for sugar mills and ensure timely payments to cane growers. Early production relied on C-heavy molasses, a by-product of sugar extraction. Policy reforms in 2018 incentivised diversion of B-heavy molasses and even direct cane juice toward ethanol, raising supplies from 38 crore litres in 2013-14 to nearly 189 crore litres by 2018-19, and increasing blending levels from 1.6% to nearly 5%. This stabilised the sugar economy and boosted rural incomes.

Rise of Grain-Based Ethanol

A crucial turning point came when the government permitted ethanol production from grains such as maize, rice, and damaged foodgrains, offering differential pricing to attract investment. Grain-based distilleries rapidly expanded across Punjab, Haryana, Bihar, Madhya Pradesh, Maharashtra, Karnataka, and other states, with over ?40,000 crore invested in facilities capable of using multiple feedstocks.

By 2023-24, of the 672.49 crore litres supplied to Oil Marketing Companies (OMCs), almost 60% came from grains, with maize accounting for the largest share. In 2024-25, grain-based ethanol procurement is expected to reach 620 crore litres, with maize alone contributing about 420 crore litres. Drought-induced sugarcane shortages and more attractive prices—?71.86 per litre for maize-based ethanol versus ?57.97–65.61 per litre for cane-based routes—accelerated the shift.

Capacity and Policy Dynamics

India today hosts 499 distilleries with an annual ethanol capacity of 1,822 crore litres. Against a 20% blending target, OMCs sought 1,050 crore litres for 2025-26, but received offers exceeding 1,776 crore litres—signalling emerging overcapacity. While this capacity enhances energy security and reduces crude imports (over $160 billion annually), it introduces new challenges in balancing supply, food security, and price stability.

Challenges: Food Security, Sustainability, and Market Balance

India now faces a classic food-versus-fuel dilemma. Producing ~420 crore litres of maize ethanol consumes over 11 million tonnes of maize, nearly 26% of national output. With maize being vital for poultry and livestock feed, diversion to fuel can raise feed costs and food inflation. Similarly, viability of rice-based ethanol hinges on surplus FCI stocks—an uncertain variable.

Environmental concerns are also emerging. While ethanol reduces carbon emissions, grain-based production increases pressure on water, land, and fertiliser use, particularly in maize-growing regions.

Way Forward

Policy refinements are underway to ensure a balanced biofuel strategy. A dual-feedstock approach—leveraging both cane and grains—along with scaling second-generation (2G) biofuels from agricultural waste, is expected to drive future growth. Adequate stock monitoring, sustainable cultivation practices, and technological innovation will be critical for achieving the 20% blending target by 2025-26 without compromising food security.

Conclusion

India’s ethanol revolution demonstrates strategic economic diversification, rural industrialisation, and commitment to energy transition. However, sustaining this momentum requires calibrated policies aligning energy security with agricultural sustainability, food availability, and environmental stewardship—critical considerations for a resilient and self-reliant biofuel future.