India’s E20 push raises food-versus-fuel concerns as ethanol demand outpaces feedstock growth

India has rapidly expanded its Ethanol Blended Petrol (EBP) Programme, achieving its target of blending up to 20% ethanol in petrol five years ahead of the original schedule, according to Policy Brief No. 77. 

The programme aims to reduce India’s dependence on imported fossil fuels and promote the use of domestically produced renewable fuel. Ethanol is primarily produced from agricultural commodities such as sugarcane, maize and surplus rice. 

India achieved the E20 target in the Ethanol Supply Year (ESY) 2025–26, which runs from November to October. During 2019–20 to 2025–26, ethanol supplied to oil marketing companies rose from 1.73 billion litres (173.03 crore litres) to a projected 12 billion litres (1,200 crore litres), representing a compound annual growth rate (CAGR) of around 38%. 

However, the supply of key agricultural feedstocks has grown at a much slower pace. Maize production grew at a CAGR of 11.4% during the period, while rice and sugarcane production increased by 4.4% and 5.1%, respectively. 

The widening gap between the growth in ethanol demand for blending and the supply of agricultural feedstocks is creating a growing food-versus-fuel trade-off, the brief said. 

The pressure is already visible in the sugar market. Low opening stocks and lower production have coincided with a 44% rise in modal retail sugar prices, from ₹45 per kg in July to ₹65 per kg as of August 29. 

Ethanol’s full economic cost 

The brief examines whether the benefits of replacing petrol with ethanol justify the economic, energy, and environmental costs associated with producing the agricultural feedstocks required for the E20 programme. It also compares India’s experience with that of the US and Brazil and reviews evidence on the energy and environmental performance of ethanol across different feedstocks. 

According to the brief, current assessments and procurement prices do not adequately reflect the full economic and environmental costs of ethanol production. Subsidised fertilisers, electricity used for irrigation, water consumption and the opportunity cost of diverting food and feed commodities are largely excluded from existing assessments. 

For instance, rice procured by the Food Corporation of India (FCI) and supplied to ethanol distilleries is priced at ₹2,320 per quintal, substantially below its estimated economic cost of ₹4,173 per quintal in 2025–26. 

Policy recommendations 

The brief calls for a more adaptive and market-oriented approach to ethanol blending. It recommends using sugar imports as an immediate buffer during periods of shortage and restricting the use of FCI rice largely to genuine surplus stocks, while moving its pricing closer to at least the acquisition cost. It also recommends making feedstock allocation more responsive to agricultural conditions and allowing greater flexibility in importing feedstocks and ethanol. 

Most importantly, the brief calls for an India-specific well-to-tank assessment of sugarcane, maize and rice that captures their full energy, environmental and economic costs, including implicit subsidies. 

Reforming distortionary input subsidies and giving ethanol producers greater flexibility to choose feedstocks based on their actual market costs could improve the efficiency of the blending programme, it said. 

In the longer term, the brief sees second-generation ethanol produced from agricultural residues and other non-food biomass to expand ethanol use without intensifying competition between food and fuel.