India's maize bind: Ethanol goals clash with feed and fuel costs
India's effort to cut its dependence on imported crude oil is inadvertently creating a new import dependence — on maize, a crop the country exported until recently. The policy push for ethanol blending, which reached its 20% target five years early, has transformed maize into India's single-largest feedstock for ethanol, but the economics are turning adverse.
Even as global crude prices have softened, the cost of producing ethanol-blended petrol has risen. The government buys ethanol made from maize at a fixed rate of ₹71.86 per litre — the highest price it pays for any feedstock, according to data submitted to the Lok Sabha. In comparison, a litre of crude oil costs India around ₹55 even with the impact of the West Asia crisis, and under ₹45 in calmer markets. The Ministry of Petroleum and Natural Gas has itself conceded that with crude near $70 a barrel, blending ethanol into petrol costs more than making petrol without it.
Maize now accounts for nearly half of all ethanol blended into petrol, up from almost nothing three years ago, government data show. When surplus rice from the Food Corporation of India and damaged food grains are included, grain-based feedstock produces nearly 70% of India's ethanol.
From sugarcane to maize
For nearly two decades since ethanol-blended petrol was introduced in India — rising from 5% in 2006 to 10% — sugarcane was the prime raw material. The deliberate shift to maize was outlined in the “Roadmap for Ethanol Blending in India 2020-25”, a June 2021 report by NITI Aayog and the Petroleum Ministry, which concluded that sugarcane alone could not meet the 20% blending target and urged a move to less water-intensive crops such as maize. India achieved the E20 target in 2025, five years ahead of schedule.
Maize is not necessarily less water-hungry in absolute terms, but as a kharif crop it is primarily rainfed and grows faster than sugarcane. While it uses less groundwater, its yield of about 3.5 tonnes per hectare is far lower than sugarcane's 80 tonnes.
Exports collapse, imports rise
As recently as 2022-23, India exported maize worth about $764 million. By 2024-25, that had collapsed to roughly $201 million — some 5.5 lakh tonnes, about a quarter of the earlier value — as distilleries absorbed the domestic crop, according to trade data from the Agriculture and Commerce Ministries. In 2024, India became a net maize importer for the first time in decades, buying around 0.9 million tonnes worth some $220 million, much of it from Myanmar and Ukraine. Domestic maize prices have climbed from about ₹15,000 to ₹25,000 a tonne in four years.
The imports are driven by the poultry and animal-feed industry, which competes with distilleries for the same grain. Feed accounts for 60–70% of production costs for these industries. Roughly 127 lakh tonnes of maize — close to a third of production — is now contracted for ethanol, forcing feed users to buy abroad to cover the gap.
Sugar mills feel the squeeze
The sugar mills that once profited from the E5 and E10 policy are now seeing diminishing returns. Prices for sugarcane-based ethanol routes have been frozen since 2022, even as the guaranteed price mills must pay cane growers has risen 16.5%. The Indian Sugar and Bio-Energy Manufacturers Association says ethanol from B-heavy molasses — a part-processed sugar stream diverted to fuel production — now costs about ₹66 per litre to make but sells at a fixed ₹60.73.
Balrampur Chini Mills, a leading producer, reported that profit from its ethanol business fell from about ₹326 crore in 2023-24 to ₹192 crore the following year. India's ethanol-making capacity has reached nearly 2,000 crore litres a year against an annual demand of only about 1,100–1,200 crore litres, leaving distilleries running at roughly half their capacity.
A policy bind
The situation presents a complex challenge. India's ethanol programme was designed to reduce crude imports, bolster farm incomes, and cut pollution. But the rush to maize has created new vulnerabilities: a dependence on imported grain, higher feed costs for poultry and livestock, and strained finances for sugar mills. With crude prices now lower, the financial rationale for ethanol blending has weakened, yet the policy remains fixed on feedstock prices that are no longer competitive.
Policymakers must balance these competing interests. Options include revisiting ethanol procurement prices, expanding feedstock options, improving maize yields through better seeds and irrigation, and allowing market signals to guide the diversion of grain. Without such recalibration, India risks trading one import dependence for another.
