India came within touching distance of 20% ethanol blending in petrol in November 2024 to October 2025. It did so five years ahead of the original 2030 target, under the government’s National Policy on Biofuels (NBP) 2018. Blending increased from around 1.5% in 2013-14 to 19.2% in 2024-25 within roughly a decade. From 4.2 billion litres in 2013-14, the installed ethanol production capacity reached nearly 19.9 billion litres by December 2025. This included 9.97 billion litres of grain-based capacity and 9.93 billion litres of cane-based and dual-feedstock capacity. The Ethanol Blending Programme (EBP) has since come under public scrutiny due to lower mileage and claims of damage to vehicles manufactured before April 2023.The government claims that since 2014-15, the programme has cumulatively saved Rs.1.9 lakh crore in foreign exchange, substituted about 31 million metric tonnes (MMT) of crude oil imports and has cut approximately 93 MMT of carbon-dioxide emissions. Few agricultural and energy transitions of this scale have moved so quickly.The question is not only whether India can physically blend more ethanol. It is also whether blending beyond 20% can, and needs to, be achieved without transferring disproportionate costs to food consumers, competing crops, groundwater, taxpayers, producers and owners of older vehicles. This long-form article explores these concerns and their implications.What is first-generation ethanol?First-generation, or 1G, ethanol is produced by fermenting sugars or starch from agricultural crops. In India, it is made mainly from sugarcane derivatives and food grains.Cane-based feedstocks include sugarcane juice or syrup, B-heavy molasses and C-heavy molasses. B-heavy molasses are those which retain some recoverable sugar, while C-heavy molasses are the final residue after most of the sugar has been extracted. Grain-based ethanol is produced mainly from maize and damaged food grains, especially rice. Distilleries generally purchase these grains from the open market. The Food Corporation of India (FCI) also supplies rice from central pool stocks at prices fixed by the government.The fuel-grade ethanol produced through these routes is chemically similar, however, oil marketing companies procure it at different administered prices. In ethanol supply year (ESY) 2025-26, maize-based ethanol received about Rs 71.86 per litre, followed by ethanol from sugarcane juice or syrup at Rs 65.61, damaged food grains at Rs 64, B-heavy molasses at Rs 60.73, FCI rice at Rs 60.32 and C-heavy molasses at Rs. 57.97 per litre. Taxes, transport and handling charges are calculated separately.ESY is the official 12-month period used in India to measure and plan the procurement of ethanol for the EBP.These differentiated prices are used to shape the feedstock mix and are expected to support cane payments, encourage maize-based production and help draw down surplus rice stocks in central pool. This means that the fiscal and resource costs of ethanol differ by route, even when the fuel supplied to an oil marketing company (OMC) is broadly the same.Feedstock yields also vary. One tonne of sugarcane produces about 70 litres of ethanol through the juice route. Whereas, one tonne of B-heavy molasses produces about 310 litres and C-heavy molasses produces 235 litres. Rice yields about 450 litres per tonne and maize about 380 litres. The actual recovery varies according to crop quality, technology and plant efficiency.Feedstock and offtake policies remain unpredictableIn December 2023, anticipating a smaller sugarcane crop during the El Niño year, the government restricted the use of sugarcane juice and syrup for ethanol production to protect sugar supplies. Thus, mills and distilleries had to revise production plans mid-season. This restriction was later relaxed, and in August 2024 the government once again permitted ethanol production from sugarcane juice, syrup and B-heavy molasses. This year too, there has been a shortfall in production of sugar. As a result, the government has allowed the import of a million tonnes of raw sugar at zero duty. It is unlikely that sugar mills will be allowed to produce ethanol from cane juice in sugar season 2026-27.Grain-based producers faced a similar disruption. After India restricted non-basmati rice exports in 2023, FCI stopped supplying rice to ethanol distilleries. Plants reliant on FCI rice had to switch to broken rice or maize until supplies resumed under revised arrangements in August 2024.Even though such interventions may be justified by food-market conditions, their problem of abruptness remains. Distilleries make long-term investments in processing systems, storage, supply contracts and debt and cannot reconfigure operations each time feedstock policy changes.Uncertainty also extends to offtake. Dedicated ethanol plants in Karnataka have alleged that OMCs failed to honour long-term offtake arrangements (LTOA) in allocations. Despite pre-contracted buying agreements, they failed to offtake agreed quantities. The Karnataka high court, in June 2026, directed OMCs to consider higher allocations, who further appealed to the Supreme Court. On 30 June, the court ordered status quo on the high court’s directions while the dispute was being considered. Litigation arose even as ethanol supply continued to expand, with about 717 crore litres reportedly supplied to OMCs between November 2025 and June 2026.Producers bear concentrated adjustment costs without a sufficiently transparent and rules-based trigger mechanism. Hence, a producer can have a functioning plant, feedstock as well as an earlier supply understanding and still face uncertainty about offtake by the OMC.FCI rice was seen as a solution to a surplus created elsewhereRice is well-suited for ethanol; its high starch content provides higher ethanol recovery than maize. The concern, therefore, is not its conversion efficiency. It is the source of the rice, the public support embedded in its price and the opportunity cost of diverting a staple food grain to fuel.Several states supplement the minimum support price (MSP) for paddy with state bonuses or other incentives. This encourages farmers toward continuous, multi-season rice cultivation, even in ecologies considered unsuitable. Thus, a well-documented driver of the paddy mono-cropping is used, which has degraded soils and is depleting groundwater in several regions. Where procurement operations are extensive, the government becomes the effective buyer of last resort for such paddy. Consequently, stocks rise well above buffer requirements. Open Market Sale Scheme (OMSS) operations have not always been able to move volumes at scale. On July 1, 2026, FCI had about 66.3 MMT of rice against the buffer norm of about 13.54 MMT. Ethanol has thus become one outlet for this surplus rice. In ESY 2024-25, the FCI allocated 5.2 MMT of rice for ethanol. This was raised further to 7.2 MMT for ESY 2025-26, as per DFPD data from July 2026. The economics of FCI rice for ethanol is also important. FCI’s economic cost of rice includes the MSP, procurement incidentals, interest, milling, storage, transportation and other expenses. This amounts to roughly Rs 4,391.45 per quintal in 2025-26. Under the OMSS for 2026-27, rice supplied to ethanol distilleries is priced at Rs 2,320 per quintal until October 2026 and Rs 2,390 thereafter. The difference between the economic cost and the initial sale price to distilleries (till October 2026) is about Rs 2,071 per quintal. More than 47% of the economic cost is borne by the government. This implies a subsidy of about Rs 14,900 crore for ESY 2025-26. Since ESY varies from the financial year (FY), the financial implication would be split across budgeted years.As per the same OMSS notification, the state governments and community kitchens can also obtain rice at the same price bracket as ethanol distilleries. Private commercial buyers, however, have to pay about Rs 2,890 to Rs 3,090 per quintal. This is nearly 25 to 33% higher than the price paid by ethanol distilleries. A commercial fuel input is being priced close to a welfare distribution channel.This does not mean that excess FCI rice should remain unused. During Covid-19 the government made good use of these stocks by providing an additional five kilograms per person under Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY). But carrying excess rice also has a fiscal cost. Grains can deteriorate, while storage space is finite. A large surplus has to be distributed, sold or processed.It is clear that releasing central-pool rice for ethanol does not address the incentive that created the overhang in the first place. Paddy cultivation remains financially attractive to farmers because of assured procurement and state-level incentives. Ethanol then provides an outlet for the excess rice procured into the central pool. Overall, there are three separate policy concerns.First, the procurement structure discourages diversification to other crops. Continuous paddy cultivation contributes to groundwater depletion and soil stress in major grain-producing regions.Second, “surplus” is a stock-management description. It does not mean that rice has no alternative food or nutrition use. NFHS-6 recorded 29.3% of children under five as stunted and 31.8% as underweight. In such a setting, the opportunity cost of diverting a staple grain deserves a careful reassessment of policy.Third, the release of rice from FCI for ethanol is being funded by the government through a food subsidy system in the Union budget. If the difference between FCI’s economic cost and the sale price to ethanol producers is not reflected in energy accounts, the full cost of ethanol is understated. FCI rice can therefore be a temporary stock-management instrument and should not become the permanent foundation for higher blending targets.Uncertainty in cane-based ethanol suppliesThe cane-based leg, already a victim of stagnant production amidst diminishing per hectare yields, carries a specific near-term weather risk as well. In the last El Niño year, 2023-24, sugarcane production fell about eight percent (from 490.5 to 453.2 million tonnes), with negligible recovery in the following year (0.3%). 2026 brings another serious El Niño event. The India Meteorological Department (IMD) has flagged the possibility of 10% deficit in overall monsoon rains. Rainfall in June 2026 was 40% less than normal. Sugarcane’s multi-season and ratoon cycle make it particularly vulnerable. Unlike maize or rice, where a weather shock can be partly recovered in the following cycle, a rainfall deficit can constrain cane-based ethanol supplies through both 2026-27 and 2027-28.A second such year would likely mean tighter cane availability and upward pressure on domestic sugar prices. Sugar stocks are already expected to be below 4 million tonnes as of September 30, 2026. And it is unlikely that sugar mills will produce ethanol from cane juice.Cultivable land is already a binding constraintIndia’s net sown area has remained broadly unchanged for half a century. It was about 140.9 million hectares in 1970-71 and around 139 million hectares in 2023-24. The area is unlikely to increase and is likely to decline gradually because of infrastructure, housing and urbanisation.Against this static base, the current 1G feedstock trajectory has significant implications. Our estimates suggest that about 8 million hectares of land are being used to produce the crops required for meeting E20 ethanol needs. This requirement is likely to grow if blending goes beyond 20%. Given the predicted centrality of maize in meeting ethanol requirements in the future, it is possible that most incremental requirements on land could come from maize. The Economic Survey 2026 has warned that the expansion of maize in states traditionally producing pulses and oilseeds may be structural rather than temporary. This matters because India is not self-sufficient in either pulses or edible oils. It imports both. If maize displaces soybean, groundnut or pulses, slightly lower crude-oil imports could be accompanied by greater dependence on food imports.These two forms of import dependence are not equivalent. Crude oil is an industrial and transport input. Pulses and edible oils are central to household diets. Higher prices affect poorer consumers disproportionately. Pulses are also a major source of protein in vegetarian and low-income diets.Replacing energy-import dependence with food-import dependence is therefore not automatically a net gain. The trade-off must be carefully measured rather than wished away. The Chief Economic Advisor has also suggested that increasing blending from E20 to E27 or E30 could impact food security. Water use differs starkly by feedstockThe water implications are also uneven. Our estimates place cultivation-stage water use for maize- and sugarcane-based ethanol at roughly 3,750 to 3,850 litres per litre of ethanol. Rice-based ethanol requires close to 9,860 litres per litre (Saini et al, 2026, upcoming). Hence, rice is the most water-intensive of the three major feedstocks. This is important because recent growth in ethanol blending has relied heavily on rice.Water accounting should therefore become a central and region-specific part of the ethanol blending programme. A litre of ethanol made from rain-fed maize cannot be treated as equivalent to a litre made from irrigated paddy in a groundwater-stressed district.Co-products create winners and losersGrain-based ethanol produces dried distillers grains with solubles, or DDGS. It can be used in cattle and poultry feed and can partially replace soybean meal in feed formulations. This is a genuine economic benefit. It improves utilisation of the original grain and can reduce feed costs. However, the effect is two-sided. Greater availability of DDGS can reduce demand for soybean meal and weaken soybean prices. Feed manufacturers and livestock producers may gain, while soybean growers may lose.DDGS quality also varies. High aflatoxin levels can restrict its use, while storage, drying and standardisation remain important. The agricultural impact of ethanol cannot be measured only through payments to maize or rice farmers. It must also include effects on competing crops and feed and fertiliser markets.Transport, depot and retail infrastructureEthanol is still moved overwhelmingly by diesel operated tank trucks. A programme conceived partly for energy security and lower emissions is, for now, largely dependent on diesel-burning road haulage.India lacks the dedicated rail, pipeline or multimodal ethanol logistics that Brazil and the United States built as their programmes matured. Brazil uses a combination of extra-large capacity ethanol-powered tank lorries, the Logum pipeline and terminal system. The US has built large rail and storage networks around its biofuel economy. India will also need dedicated rail movement, larger regional depots and more efficient multimodal logistics if volumes rise. Many fuel outlets were designed for conventional petrol. Smaller outlets may have limited tankage and multi-product dispensing systems. Ethanol blends can also foam during rapid decanting. Slower unloading can manage the problem, but it adds time and indicates that the system was not originally designed for higher blends. E25 or E85 would require more than a change in the national blending target. It would require additional compatible storage, dispensing, testing and quality-control capacity at the retail level.Vehicle and consumer readinessThe largest readiness gap appears at the consumer and vehicle level. Vehicles made after April 2023 are E20-material compliant, while vehicles manufactured after April 2025 are both E20-material compliant and engine tuned. Ethanol’s higher octane rating is a genuine advantage in modern engines. However, older vehicles will remain on Indian roads well into the 2030s. In vehicles not compatible with E20, problems with gaskets, fuel injection systems and fuel tanks can surface over time. Since blends above E15 have been in widespread use for only about two years, the long-term effects are still becoming clearer.Fuel efficiency is a more immediate concern. Ethanol contains about 29% less energy per litre than petrol (Saini et al, 2026, upcoming). At E20, the effect on vehicle mileage is much smaller because ethanol forms only one-fifth of the blend. The actual effect also depends on engine design and calibration.The NITI roadmap estimated an average six percent efficiency loss in fuel economy. Ethanol also has higher octane, which can partly offset this in engines designed to exploit it. These benefits, however, do not automatically arise in older petrol engines.Ethanol can be technically valuable as a fuel while still reducing mileage in a vehicle that was not optimised for it. Flex-fuel vehicles provide a route to higher blends because they can operate across a wider range of ethanol concentrations. But they remain a very small share of the Indian fleet. Their specialised components also add cost.Consumers also need clearer information. Fuel pumps do not always display the precise blend prominently. Drivers may not know whether they are purchasing E10, E12, E20 or another blend. A national programme should not rely on consumers discovering the blend only after observing a change in mileage. Clear labelling must be treated as basic market information.Is ethanol cheaper than petrol?The relative cost of ethanol and petrol is frequently presented as a simple comparison. It is not. Maize-based ethanol is procured at around Rs 71.86 per litre before GST, transport and handling charges. The cost of petrol depends on crude prices, refinery economics, freight, taxes and dealer margins.Government comparisons have indicated that E20 can be more expensive to produce than pure petrol when Brent crude is near $70 per barrel. Under those assumptions, the relative economics could reverse substantially only when crude rises to around $120-130 per barrel. The comparison also changes with the feedstock mix. FCI-rice ethanol, maize ethanol and C-heavy molasses ethanol have different procurement costs. Transport distances and state taxes also vary.It is therefore misleading to describe ethanol as structurally cheaper or structurally more expensive than petrol. The conclusion is valid only for a stated crude price, ethanol procurement price, tax structure and delivery cost.The better policy question is how the procurement-price mechanism should adjust when these relationships change.Priorities for the next phaseFirst, blending-volume projections should be revised against petrol demand. Motor-spirit demand growth has slowed from roughly seven percent annually earlier in the decade to below five percent more recently. Electric vehicles, particularly two-wheelers, are also beginning to affect the demand outlook. If petrol consumption grows more slowly, the absolute quantity of ethanol required for blending will also grow more slowly. Feedstock and capacity requirements should therefore be updated annually rather than based on a fixed long-term petrol-demand path.Second, lifecycle-emissions accounting must become standard. Not all ethanol has the same climate impact. Rice has a much higher emissions footprint because flooded paddy fields generate methane. Maize produces an estimated 75% less greenhouse-gas emissions than rice. Tailpipe accounting can therefore be misleading. Carbon emissions may fall at the vehicle because of ethanol blending while emissions from cultivation, fertiliser, irrigation and processing rise upstream.Brazil’s RenovaBio framework rates biofuels on lifecycle carbon intensity. India should develop a comparable system. Lower-carbon feedstocks should receive greater policy value than higher-carbon routes.Third, land-use planning must become an explicit input to biofuel policy. The government should publish an annual account of the increase in cropped area linked to ethanol feedstocks. It should identify which crops are being displaced and in which districts. The report should track changes in pulse, oilseed, maize, paddy and sugarcane acreage. Fourth, yield improvement should take precedence over acreage expansion. Sugarcane variety Co 0238 transformed yields in Uttar Pradesh but has become increasingly vulnerable to red rot. Consequently, the area under this variety has gone down substantially. No comparable replacement has emerged since its introduction in 2009. High-yielding varieties cover only about 55 to 60% of India’s maize area. Improving seed replacement, agronomy and yields could improve feedstock supply without requiring the same increase in land and water use.Fifth, the food-feed-fuel trade-off should become a standing policy question. Land use, water use, DDGS, soybean prices, pulse and oilseed displacement, rice methane and the FCI subsidy are different parts of the same problem. A cross-ministerial mechanism should bring together the Ministry of Petroleum and Natural Gas (MoPNG), the Department of Food and Public Distribution (DFPD), FCI and the Ministry of Agriculture. It should publish an annual food-feed-fuel balance. The statement should include the costs borne through food-subsidy accounts and show the feedstock used, area affected, water footprint, lifecycle emissions and effect on competing crops.Finally, India should look for alternate feedstocks. Sweet sorghum, napier and other emerging feedstocks should be treated as medium-term options.The next target must follow readinessUnlike before, higher blends, going forward, should follow demonstrated readiness in feedstock supply, logistics, retail infrastructure and vehicle fleet. Crop-based expansion should be treated as the constrained option. Residue- and waste-based pathways should receive greater priority. Productivity gains should come before acreage expansion. Water and land availability should be treated as binding constraints.The programme brought E20 forward by five years. That was an achievement in several respects. The task now is harder. India must move from meeting a blending target to managing a connected food, feed, fuel, land, water and carbon system. The suggestion of the Chief Economic Advisor to bring back E10 for older vehicle fleet may or may not be accepted by the government because of serious infrastructural and supply-chain bottlenecks. But an incentive to vehicle users for using E20 must surely be given in the form of lower price.The next target should therefore follow the readiness of the system. The system should not be forced to follow the target. We feel that an independent committee of experts should be set up by the government to evaluate the ethanol blending programme and suggest the road ahead.References:Arcus Policy Research. (2025, April). Ethanol blending of petrol in India. https://arcuspolicyresearch.com/wp-content/uploads/2025/04/Ethanol-blending-of-petrol-in-India-APR-.pdfChiniMandi. (2026, July 3). Centre fixes rice price for ethanol at Rs 2,320/quintal, keeps allocation flexible under new OMSS policy. https://www.chinimandi.com/centre-fixes-rice-price-for-ethanol-at-rs-2320-quintal-keeps-allocation-flexible-under-new-omss-policy/Department of Food and Public Distribution. (n.d.). National Food Security Act (NFSA) portal. Ministry of Consumer Affairs, Food and Public Distribution, Government of India. https://nfsa.gov.in/Department of Food and Public Distribution. (2024, August 29). Order relaxing the capping on use of sugarcane juice/syrup for ethanol production. Ministry of Consumer Affairs, Food and Public Distribution, Government of India. https://dfpd.gov.in/WriteReadData/Notices/e30bd0ec-fd5d-4b0b-87b8-59f4f92e4733_Relaxing%20of%20Capping%20of%20sugarcane%20juice%20order%2029.8.24.pdfDepartment of Food and Public Distribution. (2026). Annual report 2025–26. Ministry of Consumer Affairs, Food and Public Distribution, Government of India. https://dfpd.gov.in/WriteReadData/AnnualRecordUploadDocuments/43bf089b-73cc-4329-aeb6-c883d2f2ea55_Food%20AR%202025-26%20English.pdfInternational Institute for Population Sciences. (2025). National Family Health Survey (NFHS-6), 2023–24: Fact sheets. Ministry of Health and Family Welfare, Government of India. https://www.nfhsiips.in/nfhsuser/assets/National%20Family%20Health%20Survey%20(NFHS-6)%202023-2024%20Fact%20Sheets.pdfMinistry of Agriculture and Farmers Welfare. (n.d.). Unified Portal for Agricultural Statistics (UPAg). Government of India. https://upag.gov.in/Ministry of Finance. (2026). Economic survey 2025–26 (Chapter 6). Government of India. https://www.indiabudget.gov.in/economicsurvey/doc/eschapter/echap06.pdfNITI Aayog. (2021, June). Roadmap for ethanol blending in India 2020–25: Report of the expert committee. Government of India. https://www.niti.gov.in/sites/default/files/2021-06/EthanolBlendingInIndia_compressed.pdfPress Information Bureau. (2026). Ethanol blending in India [Factsheet]. Government of India. https://www.pib.gov.in/FactsheetDetails.aspx?id=150699&reg=48&lang=2Press Information Bureau. (2026, July 10). Ethanol Blended Petrol Programme – Q&A [Press release]. Ministry of Petroleum and Natural Gas, Government of India. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2283118&reg=3&lang=1Press Trust of India. (2024, August 29). Govt reverses ban, allows sale of 23 lakh tonnes of FCI rice to ethanol makers. The Federal. https://thefederal.com/category/business/govt-reverses-ban-allows-sale-of-23-lakh-tonnes-of-fci-rice-to-ethanol-makers-141814SAE International. (2026). Corrosion behavioral study of sintered materials in ethanol blended fuels (SAE Technical Paper 2026-26-0277). https://www.sae.org/papers/corrosion-behavioral-study-sintered-materials-ethanol-blended-fuels-2026-26-0277Singhania, K. (2026, June 30). Supreme Court orders status quo on HC direction to OMCs to consider dedicated ethanol plant’s higher allocation plea. Live Law. https://www.livelawbiz.com/top-stories/supreme-court-orders-status-quo-on-hc-direction-to-omcs-to-consider-dedicated-ethanol-plants-higher-allocation-plea-539314Tamil Nadu Agricultural University. (n.d.). Wetting and drying [Climate smart agriculture technical note]. TNAU Agritech Portal. https://agritech.tnau.ac.in/agriculture/pdf/csa_pdf/Wetting_and_drying.pdfThe Times of India. (2026, July). E20 controversy explained: Why an old roadmap is back in spotlight. https://timesofindia.indiatimes.com/business/india-business/e20-controversy-explained-why-an-old-roadmap-is-back-in-spotlight/articleshow/132343675.cmsThe Times of India. (2026, July). Rain deficit now at 43%, likely to end at over 10%. https://timesofindia.indiatimes.com/india/rain-deficit-now-at-43-likely-to-end-at-over-10/articleshow/132044088.cmsShweta Saini is an agricultural economist and the Founder-CEO of Arcus Policy Research, New Delhi. She was earlier a Senior Fellow at ICRIER and has consulted for the World Bank, the OECD, and central and state governments on agricultural policy, food security, and commodity markets.Siraj Hussain is a former Secretary to Government of India, Ministry of Agriculture.Gopal Krishan Sood has over 60 years of experience in business management, public policy, and commodity trade. He has served as Managing Director of the Gujarat Cooperative Oilseeds Growers Federation, CEO of Louis Dreyfus Company India, Executive Director at Shree Renuka Sugars and Chairman of Noble Resources India, and currently chairs Meir Commodities Ltd.