Rice, maize, or sugarcane? India’s ethanol push triggers debate over agricultural concerns, subsidies

India's Ethanol Blended Petrol (EBP) Programme has achieved its flagship 20% blending target (E20) in 2025, five years ahead of the original 2030 target — a ...

What Happened

India's Ethanol Blended Petrol (EBP) Programme has achieved its flagship 20% blending target (E20) in 2025, five years ahead of the original 2030 target — a major energy policy milestone.
However, the programme is facing intensifying criticism over three interconnected issues: the diversion of foodgrains (particularly rice) to fuel production, the water consumption associated with different feedstocks, and implicit subsidies embedded in the grain procurement-to-distillery pipeline.
Maize has emerged as the dominant single feedstock, contributing approximately 50% of ethanol in ESY (Ethanol Supply Year) 2024-25 — a dramatic shift from its 6.2% share in ESY 2022-23 — raising questions about cropping pattern distortions.
A structural subsidy has been identified: the Food Corporation of India (FCI) procures rice from farmers at approximately ₹42/kg (including MSP and handling costs) but sells it to distilleries at approximately ₹22-23/kg, with the difference absorbed by the government.
The programme has also created a significant capacity surplus: installed distillery capacity of approximately 2,000 crore litres against an E20 annual blending requirement of around 1,100 crore litres, prompting industry lobbying for export permissions.

Static Topic Bridges

Ethanol Blended Petrol (EBP) Programme

The EBP Programme is India's flagship biofuel initiative, mandating the blending of ethanol (derived from sugarcane, grains, and agricultural residues) with petrol for sale through public-sector oil marketing companies (OMCs). It serves objectives of energy security, import substitution, agricultural income support, and environmental benefit.

Launched: 2003 (pilot); expanded progressively
Target: E20 (20% ethanol blending in petrol) — originally by 2030; advanced to 2025-26 by the amended National Policy on Biofuels
Achievement: E20 nationwide rollout completed in 2025, with approximately 90,000 retail outlets covered
Ethanol procurement growth: from 38 crore litres (2013-14) to 904 crore litres (2024-25)
Revenue generated for sugar mills through EBP: over ₹1.29 lakh crore
Investment enabled: approximately ₹42,000 crore

Connection to this news: The programme's success on the blending metric has now shifted public debate to the costs and trade-offs of the feedstock choices and embedded fiscal subsidies — a second-order policy reckoning after the first-order goal is met.

National Policy on Biofuels, 2018

The National Policy on Biofuels 2018 is the overarching policy framework governing India's biofuel sector. It was amended in 2022 to advance the blending targets and expand permissible feedstocks.

Original target: 20% ethanol blending by 2030; 5% biodiesel blending by 2030
2022 amendment: E20 target advanced to 2025-26
Feedstocks permitted: sugarcane (molasses and juice), maize, damaged/surplus foodgrains (rice, wheat, barley, sorghum, bajra), agricultural residues
Categorisation: 1G (first-generation — food-crop based), 2G (second-generation — agricultural/forestry waste), 3G (third-generation — algae-based)
The policy expanded feedstocks to include damaged food grains unfit for human consumption — a mechanism to use FCI surplus stocks

Connection to this news: The policy's expansion to grain-based ethanol (including surplus rice) created the pipeline through which FCI stocks now reach distilleries at below-procurement-cost prices — the "hidden subsidy" that critics are highlighting.

Pradhan Mantri JI-VAN Yojana

Pradhan Mantri JI-VAN Yojana (Jaiv Indhan Vatavaran Anukool Fasal Awashesh Nivaran Yojana) is the flagship scheme supporting second-generation (2G) advanced biofuel production using lignocellulosic biomass and agricultural residues.

Launched: 2019
Objective: Provide financial support to integrated bioethanol projects using lignocellulosic biomass, agricultural and forestry residues, industrial waste, syn-gas, and algae
Modified August 2024: Timeline extended to 2028-29; scope expanded to include additional advanced biofuel feedstocks
Significance: 2G ethanol does not compete with food crops — directly addressing the food vs. fuel debate

Connection to this news: The dominance of 1G grain-based ethanol (especially rice) in the current programme mix is precisely what PM JI-VAN Yojana seeks to shift away from. The gap between 2G aspiration and 1G reality is a central policy tension the current debate exposes.

Ethanol Feedstock Comparison: Water Use and Economics

The choice of feedstock for ethanol production involves trade-offs between water intensity, food security impact, production cost, and price per litre. Different crops carry fundamentally different environmental and economic footprints.

Water use per hectare (ICAR-Indian Institute of Sugarcane Research data):
Sugarcane: 1,313 cubic metres/hectare
Maize: 1,691 cubic metres/hectare
Rice: 2,548 cubic metres/hectare
Ethanol price per litre (current ESY):
Maize-based: ₹71.86/litre
Sugarcane-based: ₹65.61/litre
Rice-based: ₹60.32/litre
FCI's rice transaction: Procured at ~₹42/kg; sold to distilleries at ~₹22-23/kg (implied subsidy: ~₹19-20/kg)
Maize irrigation requirement: 3-4 irrigations vs. 22 for Punjab paddy and 25-30 for Maharashtra sugarcane (contested by ICAR data on per-hectare volume basis)

Connection to this news: The water-use data is contested — absolute per-hectare volumes favour sugarcane, while number-of-irrigations arguments favour maize. This data dispute is at the heart of the "which feedstock" debate, with implications for which states benefit from the programme and which aquifers face depletion pressure.

Minimum Support Price (MSP) and Foodgrain Diversion

MSP is the price at which the government commits to purchase foodgrains from farmers through procurement agencies (primarily FCI). When MSP-procured grain is diverted to non-food uses at below-procurement-cost prices, it creates an implicit subsidy that bypasses the budget's food subsidy line.

MSP set by: Cabinet Committee on Economic Affairs (CCEA) on the recommendation of the Commission for Agricultural Costs and Prices (CACP)
FCI: Food Corporation of India — primary procurement and buffer stocking agency
Economic distortion: MSP-procurement prices that exceed market prices incentivise farmers to grow certain crops; diverting those crops to fuel at below-procurement cost absorbs public money without appearing in the explicit food subsidy bill
Foodgrain diversion risk: Large-scale diversion of rice/maize to ethanol competes with buffer stock requirements and Public Distribution System (PDS) supplies

Connection to this news: The FCI rice-to-distillery transaction at ₹22-23/kg against a procurement cost of ~₹42/kg represents a transfer to the ethanol industry embedded within the FCI's food operations — not as an explicit line-item subsidy, making it harder to evaluate and debate in budget terms.

Key Facts & Data

EBP Programme ethanol procurement: 38 crore litres (2013-14) → 904 crore litres (2024-25)
E20 achieved: 2025 (5 years ahead of original 2030 target)
Installed distillery capacity: ~2,000 crore litres (370 plants)
Annual E20 blending requirement: ~1,100 crore litres
Supply surplus: ~700 crore litres beyond blending + industrial use
Maize share in ethanol feedstock: 6.2% (ESY 2022-23) → ~50% (ESY 2024-25)
National Policy on Biofuels: 2018 (amended 2022 to advance target to 2025-26)
GST on ethanol for EBP: Reduced from 18% to 5%
Ethanol Interest Subvention Scheme (EISS): 6% interest subsidy on distillery loans
FCI rice procurement price: ~₹42/kg; sale to distilleries: ~₹22-23/kg
Water use (ICAR data): Rice 2,548 m³/ha > Maize 1,691 m³/ha > Sugarcane 1,313 m³/ha
Current ethanol prices: Maize ₹71.86/L; Sugarcane ₹65.61/L; Rice ₹60.32/L
Maize first-half contribution (ESY 2025-26): 182 crore litres
Crops displaced by feedstock expansion: Pulses and oilseeds (concerns raised)
PM JI-VAN Yojana: 2G ethanol scheme; extended to 2028-29 (modified August 2024)
Industries lobbying for: Ethanol export to Nepal, Bangladesh, Thailand, Philippines; GST reduction on flex-fuel vehicles (currently 18-40% vs. 5% for EVs)