Rising Sugar Prices Revive Food-Versus-Fuel Question in India's Ethanol Feedstock Mix

The news

NEW DELHI. The price of sugar has risen as part of a normal cycle tied to sugar output, but it comes at a time when there is a push to produce ethanol to reduce crude oil imports, and since sugarcane is also an important ethanol feedstock, the rise raises the question of whether ethanol will put pressure on crop supplies, Madan Sabnavis, chief economist of Bank of Baroda, wrote in The Indian Express on 21 September. A feedstock is the raw material from which a fuel is made. In India, ethanol is produced from maize, rice and sugarcane-derived products: around 45% comes from maize, 20-25% from rice, and the balance from sugar-based sources. One tonne of maize yields 380-400 litres of ethanol, rice 370-385 litres and sugarcane 220-280 litres. Maize is also the cheapest, at around ₹20,000-21,000 a tonne, against around ₹38,000-39,000 for rice and approximately ₹37,000 for sugar, so companies prefer it. But all three are water-intensive: producing one kilogram takes 500-900 litres of water for maize, 1,500-2,500 litres for sugarcane and 2,000-3,500 litres for rice, which argues for diverting more maize to ethanol. Maize, however, already has three sources of demand: households, who account for a small part; cattle and poultry feed, where maize makes up 60% of total feed; and industrial use for starch. Ethanol is now a fourth. Because genetically modified maize seed is not permitted, higher output has to come from existing domestic seeds, which could be a problem as ethanol demand rises with E20, the blending of 20% ethanol in petrol, being made mandatory. Higher demand could raise maize prices, which would trickle through to dairy, meat and related products. Mr. Sabnavis wrote that a tempting solution would be to allow GM seeds for maize grown only for ethanol. Surplus rice stocks procured earlier by the Food Corporation of India have been sold in the market; since their quality was low, selling them made sense, but this cannot be the strategy for ethanol feedstock in future. Maize may be preferred because of the higher water use of rice and cane, but incremental maize output will also add to pressure on water resources, alongside the push for data centres that consume large amounts of power and water. Separately, the paper reported that FMCG companies plan to hold prices through the festive season despite sugar prices touching a new high. Syllabus link: food security, cropping patterns, water and energy, GS3.

Static syllabus linkage

1. The National Policy on Biofuels sets the blending path. The National Policy on Biofuels, 2018, amended in 2022, allowed ethanol to be made from sugarcane juice, B-heavy molasses, damaged food grains, surplus rice with FCI, maize and other feedstocks, and advanced the 20% blending target from 2030 to the ethanol supply year 2025-26. Oil marketing companies buy ethanol at administered prices that differ by feedstock. The Ministry of Petroleum and Natural Gas is the nodal ministry for blending, while the Department of Food and Public Distribution handles sugar-based ethanol.
2. Genetically modified crops need GEAC approval. Release of genetically modified organisms is regulated under the Rules for the Manufacture, Use, Import, Export and Storage of Hazardous Micro-organisms, Genetically Engineered Organisms or Cells, 1989, framed under the Environment (Protection) Act, 1986, and the Genetic Engineering Appraisal Committee under the Ministry of Environment, Forest and Climate Change appraises proposals. Bt cotton remains the only GM crop in commercial cultivation in India; GM mustard's environmental release was approved in 2022 but has been under challenge in the Supreme Court. GM maize is not permitted, which is the constraint the article identifies.
3. FCI surplus and the Open Market Sale Scheme. The Food Corporation of India, set up under the Food Corporations Act, 1964, procures grain at the Minimum Support Price for the Public Distribution System and buffer stocks. Stock above buffer norms is sold through the Open Market Sale Scheme (Domestic), including to distilleries for ethanol at times. This makes surplus rice an ethanol feedstock only when surplus exists, which is why it cannot be a permanent source.
4. Sugarcane pricing is set by the Centre, with State add-ons. The Union government fixes the Fair and Remunerative Price of sugarcane under the Sugarcane (Control) Order, 1966, issued under the Essential Commodities Act, 1955, on the recommendation of the Commission for Agricultural Costs and Prices. Some States announce a higher State Advised Price. Diversion of cane to ethanol lets mills pay farmers more reliably, but it also reduces sugar output in a lean year.

Why UPSC loves this

1. Food versus fuel is a classic GS3 debate. UPSC has asked about the ethanol blending programme, its implications for food security and water, and the role of sugarcane in groundwater depletion. With E20 mandatory, the question has moved from whether to blend to what to blend it from, which is the angle this article supplies.
2. Water footprint of crops is increasingly examined. Questions on crop diversification away from paddy and sugarcane, virtual water and groundwater stress in Punjab, Haryana and Maharashtra appear regularly. The litres-per-kilogram figures here give a candidate concrete comparison.

Analysis

1. Maize wins on every ethanol metric and loses on the one that matters to livestock. The article's numbers are decisive on yield, cost and water: maize gives more ethanol per tonne than cane, costs roughly half as much as rice, and uses less water than either. But maize is 60% of animal feed. A shift towards maize ethanol therefore transmits fuel policy into the prices of milk, eggs and chicken, which are the cheapest sources of protein for many households. The trade-off is not food versus fuel in the abstract; it is protein affordability versus import substitution of crude.
2. The GM-for-ethanol idea is weaker than it looks. Allowing GM maize only for ethanol sounds neat but is hard to enforce: grain moves through markets, and segregating GM from non-GM maize at scale would require identity preservation systems India does not have. If GM maize is to be allowed, it should be decided on its biosafety and on its merits for all uses, through the GEAC, not smuggled in through a fuel-only exemption that would not hold.
3. Surplus-based feedstock is a transitional crutch. Selling low-quality FCI rice to distilleries was sensible disposal. But a blending mandate is permanent, while a rice surplus depends on procurement policy and the monsoon. A policy that relies on surpluses will be forced, in a deficit year, to choose between the mandate and the grain market. Making the mandate flexible in bad years, or holding ethanol stocks, is more prudent.
4. Water is the binding constraint, and data centres are the new competitor. Every feedstock is water-intensive, and incremental output will worsen groundwater stress. The article's aside about data centres is important: a country that is simultaneously expanding water-hungry crops for fuel and water-hungry infrastructure for computing needs a water budget, not separate sectoral targets. The counter-view is that ethanol reduces crude imports and supports farm incomes; the answer is to count those benefits against the water cost, not ignore either side.

Administrator's brainstorm