OPINION | Unintended consequences of blending ethanol with petrol

Maize and rice are considered efficient grains for manufacture of ethanol.

The National Policy on Biofuels (NPB) announced by the Ministry of Petroleum and Natural Gas in June 2018 (along with its amendment of June 2022) envisaged that 20 percent of blending of petrol with ethanol (E20) would be achieved by 2030.

In June 2021, the Niti Ayog released its roadmap 2020-25 for blending of petrol with ethanol. This was prepared by a committee of (mostly) bureaucrats under the chairmanship of Dr. Rakesh Sarwal, Additional Secretary, Niti Ayog. At that time very few would have imagined that a small by-product in the process of manufacturing ethanol would shake up the market of several agricultural commodities and cause enormous problems for soybean farmers across states.

Sources of Ethanol – Grains supply more than sugarcane

It was envisaged by Niti Ayog’s expert committee that 54 percent of ethanol requirement of 10.16 billion litres, will come from sugarcane-based raw materials and the balance will come from food grains.

The document did not project the quantity of maize or rice which will be used for ethanol.

In the Ethanol Supply Year 2024-25 (December to November), the ratio of ethanol from sugarcane and food grains is going to be completely reversed. It is projected that out of 10.77 billion litres of ethanol contracted by public sector oil marketing companies (OMCs till June 30, 2025), about 3.5 billion litres will come from sugarcane based feed stock (32 percent) and about 7.3 billion litres (68 percent) will come from food grains.

Corn is the mainstay of ethanol supply

About 5 billion litres is likely to be made from corn alone. This is about 46 percent of ethanol to be procured by OMCs. This is estimated to take 13.1 million tonnes of corn out of overall production of 42 million tonnes.

About 1.2 billion litres of ethanol is projected to be made from rice supplied by FCI at the rate of Rs 22.50/kg. The economic cost of rice is Rs. 4,173/quintal. In ESY 2024-25, the Union Government has allocated 5.2 million tonnes of rice from central pool stocks with FCI for manufacture of ethanol. The subsidy on this is estimated to be about Rs 10,000 crore.

Maize and rice are considered efficient grains for manufacture of ethanol. Ethanol yield from one tonne of maize and rice is 380 and 450 litres respectively. So, 2.22 quintal of rice is needed to manufacture 100 litres of ethanol.  To produce same quantity of ethanol, 2.63 quintals of maize is required to be used.

DDGS disturbs the equation

A bye-product of manufacturing ethanol from maize and rice is DDGS – Distiller’s Dried Grain with Solubles. It is the fermented grain in wet form, rich in protein.

DDGS from maize has about 28-30 percent protein. When ethanol is made from rice, the DDGS is even richer, and its protein content is about 45 percent.

So, this year, India will produce about 3.9 million tonnes of DDGS from maize and 1.25 million tonnes from rice. It means that that an additional supply of about 5.15 million tonnes will be in the market.

Soybean market adversely impacted

Before the manufacture of ethanol from maize and rice was incentivised by the Union Government, the major source of protein for livestock was de-oiled cake (DOC), obtained after the extraction of oil from various oilseeds like cottonseed, groundnut, mustard, rice bran or soybean. Soybean has only 18-20 percent oil but it has 40-45 percent protein.

Soybean meal used to be the preferred source of material for manufacture of poultry and cattle feed. India was not only using it for domestic consumption but also for export. This equation has been completely disturbed by availability of large quantity of DDGS obtained from maize. The de-oiled cake of soybean is selling at Rs. 31,000 -32,000 per tonne while the current price of DDGS from maize is approximately Rs. 15,500 - 16,250 per tonne (in UP Market) while that from rice is Rs. 19,500-20,000 per tonne.

Farmers unable to realise even the MSP in soybean

For soya extraction plants, the high price of meal has become a big dampener, and they are not able to sell it in competition with DDGS from maize and rice.

This has impacted soybean prices. In 2023-24 and 2024-25, the prices in APMCs in Madhya Pradesh ruled between Rs 3200 – 4,200 per quintal while the MSP of soybean was Rs 4,892 per quintal.

For kharif 2025-26, the Government has fixed MSP at Rs 5,328 per quintal, but farmers do not expect to get this price. As a result, the area under soybean has gone down from normal area of 12.7 million ha to 12 million ha. Taking the cue for much higher demand for maize from ethanol distilleries, the area under maize has increased from normal area of 7.9 million ha to 9.5 million ha.

The economy of DDGS was a subject of deep discussion at Globoil India and the consensus was that the Government policies need to provide higher incentive to protein crops so that India’s dependence on import of pulses can be reduced.

Due to availability of better seeds of maize, the farmers will continue to prefer it as the yield in several states like West Bengal and Tamil Nadu is in excess of 7 tonnes per hectare. The policy regime should be preferring food security of nation over mobility security.

(Siraj Hussain is a former Union Agriculture Secretary. Garima Jain has worked in reputed global commodity companies at leadership positions.)

Views are personal and do not represent the stand of this publication