Cheaper crude, dearer ethanol: India’s maize bind

India's push to reduce reliance on imported crude oil has inadvertently increased its dependence on maize, a crop it once exported in large quantities. With the government mandating higher ethanol blending in petrol, the demand for maize has surged, driving up prices and forcing the nation to become a net importer of the grain for the first time in decades. The government sets a fixed price of ₹71.86 per litre for ethanol produced from maize, the highest among all feedstocks. Meanwhile, the cost of importing crude oil stands at around ₹55 per litre, significantly lower than the domestic price in calmer market conditions. The Ministry of Petroleum and Natural Gas has acknowledged that blending ethanol into petrol is now more costly than producing petrol without it, given current crude prices near $70 a barrel. Maize now contributes nearly half of all ethanol blended into petrol, a sharp increase from virtually none just three years ago. Government data reveal that maize is the largest raw material used for ethanol production. Including surplus rice and damaged food grains, grain-based feedstock accounts for approximately 70% of India’s ethanol output. For nearly two decades, sugarcane was the primary source of ethanol for blending with petrol, with the blend increasing from 5% in 2006 to 10%. However, a strategic shift began in 2021 with the release of the “Roadmap for Ethanol Blending in India 2020-25” by NITI Aayog and the Petroleum Ministry. This document highlighted that sugarcane alone could not meet the 20% blending target and advocated for the adoption of less water-intensive crops like maize. India achieved this goal, known as E20, five years ahead of schedule. Although maize is not significantly less water-intensive than sugarcane, it is a kharif crop, primarily rain-fed and quicker to mature. It uses less groundwater compared to sugarcane, though its yield per hectare, around 3.5 tonnes, is far lower than sugarcane’s 80 tonnes. Export volumes of maize dropped sharply from about $764 million in 2022-23 to roughly $201 million in 2024-25, marking a decline of over 5.5 lakh tonnes, or about a quarter of the previous level. India became a net importer of maize in 2024, purchasing around 0.9 million tonnes valued at $220 million, mainly from Myanmar and Ukraine. Domestic maize prices rose from about ₹15,000 to ₹25,000 per tonne over four years. Imports of maize are driven largely by the poultry and animal-feed industries, which compete with distilleries for the same grain. Feed accounts for 60–70% of production costs in these sectors. Approximately 127 lakh tonnes of maize, nearly a third of total production, is now contracted for ethanol, pushing feed users to purchase abroad to fill the gap. Sugar mills that previously benefited from policies like E5 and E10 are now facing declining profits. Prices for sugarcane-based ethanol have remained frozen since 2022, while the guaranteed price paid to cane growers has increased by 16.5%. The Indian Sugar and Bio-Energy Manufacturers Association reports that ethanol made from B-heavy molasses, a partially processed sugar stream redirected to fuel production instead of being crystallized into sugar, now costs about ₹66 per litre to produce but is sold at a fixed rate of ₹60.73. Balrampur Chini Mills, one of the major producers, saw its ethanol business profits drop from about ₹326 crore in 2023-24 to ₹192 crore in the following year. India’s ethanol production capacity has reached nearly 2,000 crore litres annually, yet demand remains at around 1,100–1,200 crore litres, resulting in distilleries operating at about half their capacity.