Grain Ethanol Push: Farmers in India Eye ₹35,000 Crore Income Surge

India's ethanol sector is making strong progress as it inches towards meeting its clean energy and energy security goals. With a nearly 20% blending rate of ethanol in petrol achieved well before the 2025 target, the government and industry stakeholders have turned their attention to sustaining this momentum through the next phase of the Ethanol Blended Petrol (EBP) Programme. A roundtable meeting and publication of a fresh Thought Leadership Report at New Delhi on April 9, 2025, focusing on grain-based ethanol as a possible path towards enhancing rural incomes as well as promoting environmental sustainability.

The report that was discussed during the roundtable presents a comprehensive roadmap that maps the potential for grain ethanol to be a part of India's energy evolution while promoting rural development and reducing carbon emissions. The report indicates that utilization of 165 lakh metric tonnes of surplus grain annually would yield over ₹35,000 crore of direct payments to farmers, resulting in significant rural income growth and reducing pressure of urban migration.

The report is gesturing towards the success of ethanol in India to date. India had reached the milestone of 10% ethanol blending ahead of its deadline target year of 2022 and has already made 19.6% blending as of date as of January 2025. All these have helped to conserve the country about ₹1.08 lakh crore worth foreign exchange by replacing nearly 185 lakh metric tonnes of crude oil. Apart from this, this project has averted 557 lakh metric tonnes of carbon dioxide emissions, stressing ethanol's part in India's clean energy mission.

One of the major issues to be discussed in the meeting was the use of surplus food grains, particularly maize and broken rice, for the production of ethanol. India is a grain-surplus country with around 165 lakh metric tonnes of surplus grains annually, and one can utilize part of it to produce biofuel without undermining national food security. The study pointed out maize as a preferred feedstock due to its high yield of ethanol and low water demand.

Despite being successful, the ethanol sector is confronted by numerous challenges. Rising feedstock prices, especially maize, is exerting economic pressure. Ethanol purchase prices have not increased with these hikes, impacting margins across producers. In addition, reducing yields from by-products such as Distiller's Dried Grains with Solubles (DDGS) are having an impact on overall profitability among distilleries. All these challenge ethanol producers to ensure that they stay sustainable, especially those that are grain-based sources.

To fill this gap, the report suggests a chain of strategic policy recommendations. These include scaling up maize production across India to supply rising feedstock demand, having a dynamic pricing mechanism for grain-based ethanol so that prices are aligned with market sentiments, and offering a steady supply of broken and excess rice from the Food Corporation of India (FCI) until maize production is increased. Another suggestion includes strengthening domestic market linkages for ethanol by-products such as DDGS to enhance distillery economics.

The roundtable also touched on future uses of ethanol such as E100 (100% ethanol fuel), E85 (85% ethanol mix), and Sustainable Aviation Fuel (SAF). These are seen as possible ways to expand the market for ethanol and increase its significance in uses other than on-road transport. The stakeholders underscored the need for early and coordinated intervention by policies to open up these future possibilities.

The conference, which was organized by Primus Partners in collaboration with the Grain Ethanol Manufacturers Association (GEMA) and Indian Federation of Green Energy (IFGE), was attended by key policymakers, ethanol producers, and government officials. The participants laid stress on coming together to ensure the sustainability of the industry in the long term.

India's ethanol push is gaining recognition across the globe, and its policy climate has been central to framing an encouraging ecosystem for the industry. Continuous governmental patronage and industrial involvement are, however, crucial to transcending to the next phase. This includes incentivizing flex-fuel vehicles, infusing infrastructure for ethanol availability, and investments in nascent technologies like SAF.

The report and roundtable reaffirm the central role of grain-based ethanol in India's clean energy horizon. With a surplus of grains, firm government support, and a proven record of ethanol blending, the sector can offer environmental and economic returns. Going ahead, a disciplined policy environment and close collaboration between industry and the government will be required to achieve the full potential of ethanol to propel India's rural economy and facilitate its climate goals.

Source/Credits:
Source: Primus Partners, GEMA, IFGE
Date: April 9, 2025
Location: New Delhi, India