New Delhi: India’s ethanol blending programme could fall short of the government’s 20 per cent target in the 2026-27 supply year as deficient monsoon rainfall affects maize and sugarcane production, raising concerns over feedstock availability and increasing competition between food and fuel requirements, The Economic Times reported.
The ethanol blending ratio in petrol could decline to around 15 per cent during the current supply year, according to G.K. Sood, chairman of agribusiness company KN Agri Resources and a food policy expert, The Economic Times reported. Four ethanol producers also expect blending levels to remain between 15 and 17 per cent, depending largely on maize prices, Reuters reported.
India received nearly 13 per cent below-normal monsoon rainfall this year amid severe El Niño conditions, affecting agricultural production. Maize and sugar prices have increased by around 40 per cent to record levels, while rice prices have risen by 20 per cent. Retail food inflation also climbed to 7.74 per cent in September from 5.97 per cent in August.
Sood said food availability would take priority over fuel requirements, particularly during a drought year, given India’s large population.
The possible decline in blending comes after India achieved its 20 per cent ethanol blending target around five years ahead of schedule. Since 2014, the programme has helped save nearly Rs 2 lakh crore in oil import costs. At the 20 per cent blending level, annual savings are estimated at Rs 43,000 crore, according to government data.
However, the availability and cost of alternative feedstocks are emerging as major challenges. Although government rice stocks could provide an alternative to maize and sugarcane, diverting more rice towards ethanol production could increase the financial burden on the government. Rice is supplied to ethanol manufacturers at roughly half the cost incurred by the government for its procurement and storage.
A decline in ethanol blending could also affect manufacturers that have invested heavily in expanding production capacity to around 20 billion litres annually in anticipation of rising demand. Lower procurement requirements could leave the industry with substantial unused capacity.
The government has already changed its feedstock procurement priorities for the new supply season. Last month, it directed oil marketing companies (OMCs) not to procure ethanol produced from sugar-based feedstocks. It also reduced the procurement price of maize-based ethanol to Rs 68.86 per litre from Rs 71.86 per litre, adding to the pressure on producers’ margins.
Ethanol manufacturers have increasingly turned to damaged foodgrains for production, raising concerns about the availability of feed for the livestock sector, said C.K. Jain, president of the Grain Ethanol Manufacturers Association.
Industry estimates suggest that maize production could decline by as much as 15 per cent from the record 55 million tonnes reported this year. Despite higher prices, farmers may find it difficult to increase maize cultivation during the winter season because of inadequate water availability in drought-affected regions.
Harish Galipelli, director of Hyderabad-based trading firm ILA Commodities, indicated that winter maize acreage was unlikely to increase significantly under the prevailing conditions.
Meanwhile, the E20 programme has also faced concerns from motorists and automobile manufacturers over fuel efficiency and possible engine wear. Following public concerns, the government clarified that it had no plans to increase the ethanol blending ratio beyond 20 per cent.
India’s ethanol programme has expanded rapidly over the past six years, supported by favourable monsoon conditions and rising production. However, the current agricultural challenges have brought renewed attention to the need to balance fuel blending targets with food security, feedstock availability and the financial sustainability of the ethanol industry.
