India’s policy of reducing dependence on imported crude is fuelling an import dependence on maize — a product that the country exported until recently.
Also read | The road to E20 is not without bumps
Moreover, E20 fuel, made with 80% petrol and 20% ethanol, remains expensive despite crude oil prices falling in recent months. This is attributed to the low yield of Indian maize, insufficient capacity to absorb the demand for ethanol, and the need to balance domestic sugar consumption with exports.
The government buys ethanol made from maize at a fixed ₹71.86 a litre, the highest rate it pays for any feedstock, according to figures the government submitted to the Lok Sabha. A litre of crude oil, even with the impact of the West Asia crisis, costs the country around ₹55 — the price is 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 is now the source of close to half of all the ethanol that India blends into petrol, up from almost nothing three years ago, government data show. This makes it the country’s single-largest raw material used for the production of ethanol. When the use of surplus rice from the Food Corporation of India and damaged food grains are taken into account, grain feedstock is used to produce nearly 70% of India’s ethanol.
From sugarcane to maize
In the nearly two decades since India has been using ethanol-blended petrol, rising from 5% in 2006 to 10%, sugarcane has been the prime raw material for ethanol. The shift to incorporate maize is part of a deliberate strategy mapped out in the “Roadmap for Ethanol Blending in India 2020-25”, a June 2021 report by NITI Aayog with the Petroleum Ministry, which found that sugarcane alone could not carry the 20% blending target and urged a move to less water-hungry crops such as maize. India hit that target, branded E20, in 2025 — five years early.
Maize isn’t exactly less water-hungry, but is a kharif crop and, therefore, primarily rainfed and faster-growing than sugarcane. While it uses up less groundwater, its yield per hectare of about 3.5 tonnes pales in comparison to sugarcane’s 80.
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 compiled 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 by the poultry and animal-feed industry, which competes with distilleries for the same grain and for which feed accounts for 60–70% of production costs. Roughly 127 lakh tonnes of maize — close to a third of production — is now contracted for ethanol, pushing feed users to buy abroad to cover the gap.
The sugar mills that once profited from the E5 and E10 policy are now seeing diminishing returns. Prices for the sugarcane-based ethanol routes have been frozen since 2022, even as the guaranteed price that 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 the production of fuel rather than crystallised into sugar, now costs about ₹66 a litre to make but sells for 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, according to the Indian Sugar and Bio-Energy Manufacturers Association (ISMA), which estimates about 450 crore litres of capacity is lying idle. A virtual absence of ‘flex-fuel’ vehicles, capable of running higher-blends of ethanol, means that even producing more ethanol is counterproductive.
Cleaner, but climate-friendly?
Ethanol does burn more cleanly than petrol, but may not be a particularly climate-friendly alternative. While an ethanol molecule (C₂H₅OH) carries two carbon atoms, petrol is a blend of heavier hydrocarbons averaging seven or eight. Therefore, litre for litre, ethanol holds less carbon and gives off less carbon dioxide when it burns. However, that same chemistry also translates to ethanol delivering just a third of the energy per litre, and as the U.S. Department of Energy and Argonne National Laboratory explain, that is chiefly because its molecule already contains an oxygen atom, leaving it “partly oxidised” with less chemical energy to release.
The country India cites as its model runs the policy differently. In Brazil, the U.S. Department of Agriculture says ethanol prices are set by the market, not the state. However, at Indian petrol pumps, E20 sells at the same price as ordinary petrol, roughly half of which is tax. Vehicles in Brazil are capable of running ethanol-petrol blends that comprise 85% ethanol and even 100% ethanol, and drivers there buy ethanol only when it is cheap enough to balance the lower fuel economy.
In India, the government says ethanol blending has saved well over ₹1 lakh crore in foreign exchange and boosted farm incomes. Those gains flow to the exchequer and to farmers, not to the motorist.
