India’s Ethanol Boom Is Outrunning Its Feedstock: Why the Next Litre Must Come From Crop Waste, Not Grain

Introduction: A Fuel Success Story With a Feedstock Problem

India’s ethanol blending programme has become one of the more visible achievements of the country’s clean-energy push. What began as a modest, sugarcane-driven initiative has expanded into a nationwide E20 rollout, with fuel standards for even higher blends -E22, E25, E27 and E30 -already notified by the government. Distillery capacity across the country has grown from around 421 crore litres in 2014 to nearly 2,000 crore litres today, roughly double the ethanol that oil marketing companies (OMCs) currently offtake in a year.

But the composition of that ethanol has changed just as dramatically as its volume. In the programme’s early years, almost all of it came from a single, low-value by-product of sugar milling: C-heavy molasses, the residual syrup left over after sugar has been crystallised out of cane juice. Today, the picture looks very different. For the ethanol supply year ending October 2026, grain -chiefly maize and rice sourced from the Food Corporation of India (FCI) -is expected to account for as much as 72.5 per cent of total ethanol supply, against 27.5 per cent from sugarcane-based feedstock.

This shift from a sugar-industry by-product to staple food grains sits at the centre of a genuine and still-unresolved policy debate. It touches food security, given that some of the rice diverted to ethanol comes from stocks meant for welfare schemes. It touches water security, because rice, sugarcane and maize are all water-intensive crops grown heavily in already-stressed regions. It touches vehicle economics, since ethanol’s chemical properties differ meaningfully from petrol’s. And it sits alongside a separate but related story -India’s consistently poor showing on Yale University’s Environmental Performance Index (EPI), which has repeatedly flagged air quality and biodiversity as the country’s weakest links.

This article draws on government data, independent agricultural reporting, and policy documentation to lay out what is actually happening in India’s ethanol economy, where the genuine trade-offs lie, and why second-generation (2G) ethanol -made from crop residues rather than food grain -is increasingly presented as the structural answer to several of these tensions at once.

The Evolution of India’s Ethanol Blended Petrol Programme

India’s Ethanol Blended Petrol (EBP) programme was originally conceived to support the sugar industry. Sugar mills facing stagnant domestic consumption but rising production needed an additional revenue stream to make timely cane payments to farmers, and ethanol supplied that outlet. Until 2017-18, the entire ethanol supply to OMCs was drawn from C-heavy molasses -a thick, dark by-product from which mills cannot economically recover any further sugar after three rounds of boiling and crystallisation.

From the 2018-19 supply year onward, the feedstock base widened. Mills began producing ethanol from intermediate-stage B-heavy molasses and directly from sugarcane juice and syrup, after the government began paying a higher price for ethanol made through these routes than for the conventional C-heavy route. This pricing incentive worked: ethanol supply to OMCs rose from 38 crore litres in 2013-14 to 190 crore litres in 2018-19, and the all-India average blending rate climbed from 1.6 per cent to 4.9 per cent over the same period.

The table below traces how the feedstock mix has changed over the life of the programme, based on official supply-year data reported in the Indian Express.

Two things stand out from this trajectory. First, the scale of the programme has grown more than twenty-five-fold in little over a decade -from 38 crore litres in 2013-14 to roughly 1,048 crore litres allocated for the year ending October 2026. Second, and more significant for this discussion, the composition has flipped almost entirely. In 2023-24, total ethanol supply of 673 crore litres achieved an average blending level of 14.6 per cent, with grain-based feedstock alone contributing 402 crore litres, or 59.7 per cent of the total -a level that had never been reached before in the programme’s history. For the year ending October 2026, grain’s share is projected to rise further, to 72.5 per cent of a 1,048.3-crore-litre pool, while sugarcane-based feedstock supplies the remaining 27.5 per cent.

The Changing Feedstock Landscape: From Cane By-Product to Staple Grain

This reversal has an immediate cause: sugar economics. With domestic sugar prices elevated and stocks projected at a multi-year low heading into the 2026-27 supply year, it is unlikely that the government will permit ethanol production from direct cane juice or B-heavy molasses in that year. Mills will instead be pushed to recover the maximum possible sugar from cane juice, limiting ethanol production to the non-crystallisable sucrose left in C-heavy molasses -effectively reverting sugarcane’s role in the programme closer to where it started.

Sugar diversion into ethanol has nonetheless been a real and measurable draw on supply in recent years. According to Indian Express reporting, diversion through the B-heavy and cane-juice routes amounted to 2.2 million tonnes (mt) of cane-equivalent sugar in 2020-21, and 3.6 mt, 4.3 mt, 2.4 mt, 3.5 mt and 3 mt in the five sugar years that followed. The most recent figure of 3 mt represents roughly a tenth of India’s estimated gross sugar output of 30.9 mt in 2025-26 -a meaningful, if not overwhelming, share of national production.

With sugarcane’s contribution constrained, grain has filled the gap -and increasingly, that grain is rice drawn from FCI’s central pool. For the 2025-26 supply year, the government allocated 5.2 mt of surplus FCI rice to ethanol distilleries, a figure that was raised to 7.2 mt in July 2026. At a conversion rate of 450–460 litres of ethanol per tonne of rice, that additional allocation would yield roughly 325–330 crore litres. With sugar diversion curtailed and maize supply facing its own uncertainties (discussed below), Indian Express reporting notes that sustaining even the current E20 blending level -which requires around 1,050 crore litres of ethanol -would likely require earmarking still more FCI rice.

The Price Gap in FCI Rice for Ethanol

The economics of this route raise a separate question of value. FCI rice is sold to ethanol distilleries at Rs 23.2 per kg, with the auction reserve price for rice with 100 per cent broken grains set even lower, at Rs 21 per kg. For comparison, the Department of Consumer Affairs’ latest data puts the all-India modal retail price of normal rice at Rs 40 per kg and broken rice at Rs 30 per kg. Rice, in other words, is reaching distilleries at roughly half the price a consumer would pay for it in the open market -a gap that explains why the diversion of foodgrain into fuel remains a live point of scrutiny, even when it is framed as the use of genuinely surplus stock.

Maize: A Parallel Demand Story

Maize tells a related story from the demand side. Ethanol has become an important additional buyer for a crop that was historically used mainly for poultry feed, livestock feed and industrial starch. Indian Express reporting notes that wholesale maize prices rose from a range of Rs 13.8–17.8 per kg in 2021 to Rs 22.1–24.5 per kg in 2024, a period that coincides with maize’s rapidly growing role in the ethanol supply chain -its contribution rose from essentially zero before 2022-23 to 479 crore litres’ worth of feedstock allocated for 2025-26, on Table 1 above. Looking ahead to 2026-27, the same reporting flags that El Niño conditions, expected to persist through the first half of the year, could constrain maize availability just as sugarcane-based supply is also being curtailed -tightening the feedstock picture from two directions at once.

E20 and the Transition Challenge: What Higher Blends Mean for Vehicles

Alongside the feedstock question, industry commentary has raised a second, more technical concern: how well India’s existing vehicle fleet is suited to higher ethanol blends. It is worth being precise here about what is established fact and what is argument.

Ethanol’s basic chemical properties are well documented. It is hygroscopic -it absorbs atmospheric moisture -and its calorific value of roughly 6.4 kcal/g is markedly lower than petrol’s 10.3 kcal/g, a difference of about 35–38 per cent. A policy critique titled “The Ethanol Trap,” one of the reference documents behind this article, argues that this lower energy density causes E20 to reduce fuel efficiency by an estimated 3–6 per cent compared with pure petrol, and that moisture absorption can, over time, lead to phase separation in fuel tanks, corrosion of metal components, degradation of non-compatible rubber hoses, clogged filters and engine stalling -risks it argues are most relevant for an estimated 80 million legacy two-wheelers and a substantial number of cars built before the BS6 Stage II emission norms took effect in March 2023.

The same document also raises a more specific materials-engineering concern: that chloride contamination associated with the maize wet-milling process used at grain-based distilleries can increase stress-corrosion cracking in carbon steel fuel-system components, citing a 2013 study on chloride effects in simulated fuel-grade ethanol published in Electrochimica Acta. It further notes that, unlike Brazil or the United States, India does not currently offer motorists a choice of unblended or lower-blend fuel at the pump.

These are documented arguments from a critical policy commentary rather than settled, universally-accepted engineering conclusions, and readers should treat them as one side of an active debate rather than proven outcomes for every vehicle. What is not in dispute is the underlying chemistry -ethanol’s hygroscopic nature and lower calorific value relative to petrol -and the fact that India’s blending trajectory (E20 today, with E22 through E30 standards already notified) is moving faster than the natural replacement cycle of the country’s vehicle fleet. That gap between policy pace and fleet turnover is the crux of the transition challenge, whatever view one takes of its precise severity.

Food, Feed, Water and Fuel: The Resource Competition Question

The most consequential debate around India’s ethanol programme is the extent to which it competes with food, animal feed and water resources that have other, more immediate claims on them.

Food Security and the FCI Rice Question

“The Ethanol Trap” argues that diverting maize, damaged foodgrain and FCI rice stocks into ethanol production conflicts with the food security of the roughly 80 crore beneficiaries covered by India’s public distribution system, and that it also reduces feedstock available to the livestock sector, contributing to higher prices for sugar, milk, eggs and meat. This is presented in the document as a policy argument and risk rather than as a verified, quantified outcome, and it should be read as such. What can be stated as fact, based on the Indian Express reporting cited above, is the scale of the rice allocation itself -7.2 mt for 2025-26 -and the price at which that rice reaches distilleries relative to its open-market value.

Water-Intensive Cropping

A related concern raised in the same document is that cultivating rice, sugarcane and maize -all water-intensive crops -in hydrologically stressed regions such as Punjab, Haryana and western Uttar Pradesh is accelerating groundwater depletion. Again, this is presented as an argument in the source material rather than as an independently verified measurement within these documents, but it aligns with the broader, well-established agronomic reality that all three crops carry a high water footprint relative to alternatives such as millets.

A Possible Way Through: Alternative Feedstocks

The Indian Express analysis points to one practical option worth noting: millets such as bajra and jowar contain 58–62 per cent recoverable starch and can yield 380–400 litres of ethanol per tonne -comparable to maize -while requiring less water. Shifting a portion of grain-based ethanol demand toward such crops, the analysis suggests, could let millet farmers benefit from the kind of price realisation that maize growers have seen, without adding further pressure to India’s most water-stressed agricultural belts.The Environmental Dimension: What the EPI Ranking Says -and Doesn’t Say

Running alongside the feedstock debate is a separate but relevant thread: India’s persistently weak performance on Yale University’s Environmental Performance Index (EPI). In the 2026 assessment, released by the Yale Center for Environmental Law & Policy, India was ranked 176th out of 177 countries -the second-lowest position after Laos -with a score of 22.46 per cent, against a global-topping score of 74.79 per cent for Estonia. Within South Asia, India ranked seventh of eight countries assessed.

India’s EPI trajectory over the past decade has been one of consistent decline: from 141st in 2016 to 177th in 2018, 168th in 2020, and a low of 180th -the worst position among all countries assessed -in 2022, before settling at 176th in both 2024 and 2026. The country has remained within the five worst-performing nations on the index since 2022.

The 2026 assessment considered 47 indicators across 12 issue categories. India’s weakest categories were environmental health and biodiversity, both ranked 174th, and its comparatively stronger category was climate change, at 130th -also its most improved category, gaining 13.98 points over the past decade. Waste management and sanitation were both ranked 141st. Air quality has been a particular pressure point: India’s air-quality score actually slipped by 0.15 points over the decade, despite the country spending Rs 16,423 crore on the National Clean Air Programme since its launch in 2019.

It is important to represent the methodology debate accurately. When India received its lowest-ever EPI ranking in 2022, the Ministry of Environment, Forest and Climate Change (MoEFCC) formally rejected the findings, stating that the analysis contained “many indicators based on unfounded assumptions” and that some indicators were “extrapolated and based on surmises and unscientific methods.” Responding to similar criticism in 2026, Martin Wolf, the EPI’s Principal Investigator at Yale, said the index is designed to measure countries’ current environmental conditions rather than their stated policy intentions, and that India’s low score reflects performance across a range of issues -air quality, water quality, agriculture and fisheries -rather than climate change alone. He also acknowledged that historical, cumulative emissions, a factor the Indian government has previously raised, are not part of the EPI’s methodology.

Independent experts interviewed for the Down To Earth report offered a more measured middle ground. Anjal Prakash of FLAME University, Pune, described India’s low rank as “real but incomplete,” arguing that compressing a large, diverse, low-income country into a single cross-national score can overstate comparisons with wealthier nations that followed different historical development paths -while also noting that India’s poor showing is concentrated in a few high-impact indicators rather than reflecting universal underperformance. Nilanjan Ghosh of the Observer Research Foundation similarly cautioned that the index does not fully capture the developmental realities of a country at India’s scale and stage of economic transformation, while agreeing that the ranking should not be dismissed outright, since it highlights genuine and pressing concerns in air quality, urban environmental management, wastewater treatment and biodiversity conservation.

Why does this matter for a discussion about ethanol feedstock? Because one of the most direct levers connecting agricultural policy to air quality -India’s weakest and most stagnant EPI category -is what happens to crop residue after harvest. Large volumes of paddy straw are burned in fields across northern India each winter, a widely documented contributor to seasonal air pollution across the Indo-Gangetic plain. Any programme that gives farmers and industry a commercial reason to convert that residue into fuel, rather than burn it, addresses a fuel-supply objective and an air-quality objective simultaneously. That is precisely the logic behind second-generation ethanol.

Why Second-Generation (2G) Ethanol Matters

Conventional, or first-generation (1G), ethanol in India is made from the parts of a crop that also have food, feed or industrial value: sugarcane juice and molasses, and the starch in maize and rice grain. Every litre of 1G ethanol therefore carries some degree of competing claim from food, feed or sugar markets -which is exactly the tension explored in the sections above.

Second-generation, or 2G, ethanol is produced from a different category of raw material altogether: lignocellulosic biomass, the fibrous, non-food residue left over once the primary crop has been harvested. This includes paddy and wheat straw, sugarcane bagasse, corn stover, and other agricultural residues that are otherwise treated as waste -and, in large volumes across northern India, simply burned in the field. Because 2G feedstock is residue rather than the harvested grain or cane juice itself, converting it into ethanol does not draw directly on food, feed or sugar supply in the way 1G grain-based ethanol does, and it offers an additional environmental benefit by giving farmers and aggregators a commercial alternative to stubble burning.