Policy think-tank ICRIER has urged the government to be flexible with the Ethanol Blended Petrol (EBP) programme. Though it has supported E20 as a long-term goal, ICRIER has said that the government should allow a temporary reduction to E15 when domestic ethanol availability is insufficient.
In a research paper titled “Food vs Fuel: Recalibrating India’s Ethanol Blending Strategy” authored by Ashok Gulati and Tanmoy Adhikary for ICRIER and released on Tuesday, it called for an India-specific well-to-tank assessment of sugarcane, maize and rice.
“A study that incorporates their full energy, environmental and economic costs, including implicit subsidies. Reforming distortionary input subsidies and allowing ethanol producers greater flexibility to choose feedstocks based on their true market costs could improve efficiency,” the study said. The choice between maintaining E20, importing ethanol and temporarily reducing blending should ultimately depend on their relative economic costs under prevailing conditions, it said.
Long-term objective
India has rapidly expanded its Ethanol Blended Petrol (EBP) Programme as ethanol is produced from sugarcane, maize and rice, while research is continuing to expand the crops to include sweet sorghum.
“The 20 per cent target can remain the long-term objective, while a temporary reduction to E15 could be considered in years when domestic ethanol availability becomes insufficient, or the cost of maintaining E20 becomes disproportionately high in terms of food and/or feed prices,” the paper said.
The programme aims to reduce dependence on imported fossil fuels and increase the use of domestically produced renewable fuel as part of the government’s energy security initiative. India achieved E20 target in the Ethanol Supply Year (ESY) (November to October) 2025–26, five years ahead of the original schedule.
“Sugar-based ethanol can remain important when sugar supplies are abundant, but sugar diversion should be moderated when stocks become tight,” it said, adding that maize should absorb a larger share of ethanol demand as its productivity and market supply improve, while FCI rice should remain largely a residual outlet for genuine surplus stocks, but the pricing of rice should be raised to at least its acquisition costs.
Not capturing economic costs
The findings suggest that current assessments and procurement prices do not adequately capture the full economic and environmental cost of producing ethanol. In particular, subsidised fertiliser, electricity used for irrigation, water use and the opportunity cost of diverting food and feed commodities are largely absent from existing assessments, it pointed out.
The paper said that what is needed is a flexible feedstock strategy that can maintain E20 without placing excessive pressure on food markets when agricultural supplies tighten.
Oil marketing companies (OMCs), which procure ethanol at government-set prices without any binding on grain-based distilleries to pay up farmers at least minimum support prices (MSPs), had procured 6.79 billion litres (679.04 crore litres) in ESY 2023–24, 10.33 billion litres (1,033.31 crore litres) in 2024–25 and 7.05 billion litres (705.43 crore litres) up to June 2026, with corresponding expenditure of about Rs 48,757 crore, Rs 73,996 crore and Rs 49,577 crore, respectively, including GST and transportation.
During 2019–20 to 2025–26, ethanol supplied to oil marketing companies increased from 1.73 billion litres (173.03 crore litres) to a projected 12 billion litres (1,200 crore litres). This represents a CAGR of about 38 per cent over six years.