Economic Highlights

New Delhi, 6 April 2026

India’s Ethanol Push

FIRMS GAIN, FOOD & WATER LOSE

By Shivaji Sarkar 

Every crisis in India is fast becoming a pretext for profit masquerading as reform. The Strait of Hormuz oil crisis has now been repurposed to justify 20 percent ethanol blending (E20)—pitched as green and strategic, but structurally unsound. It threatens food, water, and land security while enriching an industry. 

Consumers pay twice: 8–10% lower mileage and costly retrofits—Rs 20,000–Rs70,000 for each of over 40 crore running vehicles—turning a supposed solution into a nationwide economic crisis. 

The touted energy benefit is possibly a myth and drain on agricultural resources gigantic.To meet the target, the country will require about 1,016 crore litres of ethanol annually. Achieving this would require a shift from sugar and sugarcane—leading to a growing dependence on maize, broken rice and rice procured from Food Corporation of India. Estimates suggest that India will need to produce 11–12 million tonnes of grains, comprising maize and rice, 275 million tonnes of sugarcane, covering a land area equal to 7.1 million hectares of land. 

Experts caution that while high yielding varieties can help meet the demand, it would also increase reliance on water, pesticides and fertilizers. According to Mumbai-based IndiaSpend’s report, the E20 target may not significantly reduce emissions, may harm food security, and will provide only marginal energy security. 

Further, the Institute for Energy Economics and Financial Analysis (IEEFA) argues that using food-based feedstocks for ethanol production may not be the best use of land in a country where hunger remains a pressing issue.In effect, fuel drives would bite into food-producing lands or forests, burdening the nation’s scarce resources 

Not Carbon Neutral

Equally alarming is the water footprint. Sugarcane in India alone uses ~50 percent of irrigation water. Producing one litre of sugarcane-ethanol guzzles about 2,860 litres of water. That is nearly three cubic meters of water for a glass of fuel. In a water-stressed country, this is catastrophic. NITI Aayog warns that ethanol expansion could raise India’s annual irrigation demand by 50 billion cubic metres by 2070 – enough to quench Delhi’s thirst for 17 years. Most districts in India already face water scarcity. Redirecting scarce groundwater into fuel tanks undermines farms and drinking supplies alike. 

Ethanol expansion in India will divert~7–8 million hectare of cropland, sharply raise water use, and intensify food–fuel competition, risking higher food prices.Forcing crop-based fuels can increase overall greenhouse emissions – as seen in the US. More land clearing and fertilizer use raised carbon intensity of ethanol. 

Lifecycle Emissions: Food Security Under Threat

India is already wrestling with food inflation and crop shortages. Retail food prices have been above the RBI’s comfort zone for years. In 2023 poor rains and heat knocked down yields of staples (wheat, rice, sugarcane). The government banned wheat and sugar exports and imposed minimum prices on rice to keep markets stable. Against this backdrop, turning food crops into fuel is perilous. 

NITI Aayog estimates ethanol demand will divert 6.1 mt maize and 5.5 mt rice (~7.1 million hectare), tightening food supply and raising prices—echoing US Renewable Fuel Standard impacts. Expanded sugarcane further displaces crops and strains water, undermining land, water and food security.In short, ethanol endangers three pillars of security: it eats into cropland, it drains aquifers, and it chips away food availability. 

Who Profits &Who Pays?

While communities face scarcity, ethanol producers and associated industries reapprofits, stated to be Rs 20-25 a litre. In other words, ethanol pricing needs drastic cut. 

Companies building new unnecessary distilleries and sugar mills enjoy record demand and generous pricing for ethanol. In a recent tender for the Ethanol Supply Year (ESY) 2025-26 (starting November), Indian oil marketing companies (OMCs) asked for 10.5 billion litres of ethanol, but the domestic industry offered 17.76 billion litres, far exceeding the government’s requirement. 

This massive oversubscription of over 70 percent highlights a significant structural surplus in India’s ethanol capacity, driven by over Rs 40,000 crore in investments in recent years for E20 blending.  

Industry sustains distilleries through mandates, quotas and assured prices, branding E20 as “energy independence,” while effectively socialising environmental costs and privatising profits—leaving the public to bear higher food prices and water stress. 

Backed by floor-ratio-production (FRP) hikes, mandates, subsidies and post-2022 export curbs, distilleries expand as citizens bear the burden on food, water and land. When export restrictions hit sugar in 2022, the sector pivoted to fuel. In states like Maharashtra and Uttar Pradesh, hundreds of proposals for new ethanol distilleries have sprung up, bolstered by tax breaks and subsidies. 

The higher sugarcane FRP and ethanol purchase mandates distillery margins. Ethanol stands out as a classic crisis-with-opportunity: global carbon pressure and oil shocks give industry cover to expand, even as ordinary Indians pay with their food, water and land. 

A False Energy Transition

Biofuel blending offers only limited decarbonisation, as crop-based fuels still emit significant carbon and can worsen emissions through land-use change. It does little to reduce India’s 80–90% oil import dependence, given ethanol’s lower energy density. 

Pushing food crops into fuel production under global climate pressure risks harming food security and growth priorities. India needs independent, context-driven energy strategies that balance emissions with equity and development. It must not succumb to global climate discourse – driven by Western carbon pressure. India’s per capita emissions remain far below the developed world’s, and its priority must be equitable growth and food security. 

Towards Real Energy Security

India’s energy crisis reflects policy gaps, not resource scarcity. Priorities should include boosting energy efficiency to curb demand, scaling solar and wind as truly indigenous alternatives, and optimising transport via rail, buses and electric three-wheelers. Biofuel efforts must focus on waste-based and advanced technologies that avoid food and water stress. Additionally, green hydrogen from renewables offers a viable pathway for industry and heavy transport without burdening farmland. 

Ethanol blending should remain marginal, not central; crop-based fuel risks national resources for limited gains. Policymakers must avoid short-term optics that create long-term economic and ecological costs. 

India’s strategic goal should be securing energy and agriculture simultaneously, not sacrificing one for the other. By all means, use cleaner fuels – but not at the cost of starving our farms and drying our wells. The true path to energy independence lies in myopic promotion of ethanol. ---INFA 

(Copyright, India News & Feature Alliance)