How India’s ethanol-fuelled corn rush is reshaping farms and fuelling risks

Corn, also known as maize, offered hope. With demand for the grain soaring because of rising production of ethanol, a biofuel blended with petrol, and competing demand from the poultry industry, which uses it as animal feed, Raghuvanshi joined a band of farmers from his neighbourhood who had switched to corn.

But the switch has not been smooth, courtesy some uninvited guests. Rodents snacked on corn seeds planted beneath the soil before they could sprout. Some plots had to be replanted. Raghuvanshi is now waiting for the dreaded wild boars. These beasts, which often weigh more than an overweight human (90-110 kg), are expected to arrive as the corn ripens. “I have to fence the field with electric wires because that is the only way to stop them,” he said.

Raghuvanshi explained that his decision to move away from soybean is a calculated bet. Bean prices are hovering around ₹4,500 per quintal, near levels last seen in 2020. Corn prices meanwhile have surged from ₹1,400 per quintal to more than ₹2,200 last year, an increase of over 50%. “By replacing soy with corn, I am expecting to make ₹15,000 more on every acre, net of all costs,” he said. On his 30-acre corn plot, that translates to ₹4.5 lakh (to spend ₹50,000 on an electric fence thus seems a good investment).

To be sure, this is not a one-off case of a farmer experimenting with a new crop. As per the agriculture ministry, farmers across states have sowed corn on a record 9.4 million hectares in the ongoing Kharif crop season, planting for which began in June with the onset of the monsoon. The corn area is 19% higher than the past five-year average, and 12% higher on-year. Similarly, the area under sugarcane is up 9% (compared to the five-year-average) while that of rice is up 7%.

What ties these crops—maize, rice and sugarcane—is that all three are now used to make ethanol (they are hence known as ethanol feedstock). Maize alone contributed nearly 43% to ethanol production in the ongoing ethanol supply year (ESY) 2024-25 till end-July. The ESY runs from November to October.

Together with rice, over 60% of ethanol was produced from grain-based feedstock in 2024-25. Though most tend to think that sugarcane is the primary feedstock for producing ethanol, its share fell to 38%, following a crippled harvest last year. The heavy lifting done by maize pushed its prices higher, prompting more farmers to switch to this new fuel crop.

E20 moment

July was a momentous month for the biofuel sector in India. By the end of the month, average ethanol blending touched 19% for ESY 2024-25. This means that between November 2024 and July 2025, the average rate of ethanol blending in petrol was 19%. Five years back, the average ethanol blending stood at a mere 8.1% (ESY 2020-21).

India was tantalizingly close to achieving the E20 target, to blend 20% ethanol in petrol, months ahead of schedule. In 2022, the national policy on biofuels advanced the target to achieve E20 blending by five years—from 2030 to ESY 2025-26. Currently, an inter-ministerial committee is exploring if India should mandate a higher E27 blend in future.

As per the government, since 2014, the ethanol blending programme (EBP) helped India save ₹1.44 trillion by substituting imported crude oil. Payment delays by sugar mills to cane growers are history now, with excess supplies diverted to produce ethanol.

Farmers benefited from an additional source of revenue: now they are not only annadaata (food producer) but also urjadaata (energy producer), the government said.

In a statement last month, the petroleum ministry pointed out the environmental benefit: ethanol blending has lowered carbon emissions by 74 million tonnes, equivalent to planting 300 million trees.

As per the government, since 2014, the ethanol blending programme (EBP) helped India save ₹1.44 trillion by substituting imported crude oil. Payment delays by sugar mills to cane growers are history now, with excess supplies diverted to produce ethanol.

These are significant achievements for a country heavily dependent on imported fuel. But this newfound success was marred by vehicle owners complaining of reduced mileage and increased wear and tear of engines for older vehicles not compliant with E20 fuel. Brushing aside these concerns, the government has said that use of ethanol only leads to a negligible decline in fuel efficiency and going back to 100% petrol will mean losing out on gains such as pollution reduction, energy transition and farmer benefits.

Cereal-centric

Meanwhile, the ethanol push is rejigging the farm. Experts have raised concerns beyond the food vs fuel debate (whether or not to divert food crops to produce biofuels). The most critical factor is: farmers are planting more cereals and sugarcane and moving away from crops such as oilseeds, pulses and cotton. While India is heavily dependent on imports for edible oils and pulses, it turned a net importer of cotton recently.

View Full Image

Currently, the E20 mandate appears to be a lowhanging fruit due to ample rains and overflowing granaries. This may not always be the case. A deficit monsoon can put a spanner in the wheel of the ethanol blending target. Towards the end of 2022, for instance, India was forced to announce export restrictions on rice following deficit rains. These curbs were fully removed only last October.

Besides, it has to be seen how the country will meet the blending target in coming years as fuel demand will continue to grow with increasing vehicle numbers, unless of course, more users take to electric vehicles. Since the crop area is a constant, will the growing demand for ethanol lead to higher production of water-intensive cereals such as rice and sugarcane?

There’s more: the Food Corporation of India (FCI), the government’s grain manager, has offered 10.4 million tonnes of surplus rice for ethanol production for ESY 2024-25 and 2025-26. The bizarre part is, this rice is offered at a subsidized price of ₹22.5 per kg, at nearly half the economic cost for FCI.

The government has a stated objective of crop diversification but the ethanol blending programme is leading to a more cereal-centric production system, away from oilseeds and pulses, which will impact the nutritional quality of diets, said Ajay Vir Jakhar, chairman of Bharat Krishak Samaj, a farm policy advocacy body, and former head of the Punjab Farmers Commission.

Jakhar added that these feedstock crops use more subsidized fertilizers, chemicals and water to grow. So, the ethanol push is a trade on future soil quality and water availability.

View Full Image

Ditching soy

Planting data from the agriculture ministry shows that the food crop most impacted by the growth in corn acreage is soybean. The area under the oilseed is down 5.4% compared to the five-year-average. The area under tur or pigeon pea, a pulse variety, is marginally lower. Cotton, where India turned a net importer recently, is down by a staggering 16%.

Farmers’ interest in soybean has declined due to two reasons. Firstly, India is importing cheap soy oil from Brazil and Argentina at low duties. Indian farmers are unable to compete with imported oil due to low productivity—about a third compared to their global counterparts, who plant genetically modified or GM soy.

India imports oil extracted from GM soybeans—with the understanding that it contains no detectable DNA or proteins. It does not allow the import of soy meal, except under special circumstances, as it did during a period of shortage and price rise in 2021.

Farmers’ interest in soybean has declined. India is importing cheap soy oil from Brazil and Argentina at low duties. Indian farmers are unable to compete with imported oil due to low productivity.

Secondly, the protein-rich leftover after extracting oil from soybeans, known as de-oiled soy cake (DOC), is a source of feed for the poultry industry. The price of DOC has been on the decline as the poultry industry is using cheaper DDGS (distillers’ dried grains with solubles), a byproduct of maize and rice-based ethanol production. Falling prices of DOC, which constitute nearly 80% of soy by weight, is one reason why bean prices are pitifully low.

The poultry industry, which was the largest consumer of maize (as animal feed) until recently, absorbed a 50% spike in maize prices over the past five years, said Harshakumar Shetty, general manager at Venkateshwara Hatcheries, a leading poultry business. “In this situation, the substitution of soya DOC with cheaper DDGS indirectly helped us,” he explained.

Shetty added that maize prices are likely to stay benign this year since the government is providing FCI rice and has also lifted restrictions on producing ethanol from sugarcane juice.

Future risk

India’s growing thirst for ethanol is dependent on the rain-fed Kharif season since all the feedstock crops are grown during this period. “Our estimates suggest that E20 blending will require a crop area of around 7.7 million hectares in 2025-26, about the entire gross cropped area of Bihar. The land area for growing feedstock crops is likely to cross 10 million hectares by 2029-30,” said Shweta Saini, agriculture economist and founder-CEO at the Delhi-based Arcus Policy Research.

The problem, Saini emphasizes, is that the government wanted farmers to move away from rice to grow maize (to reduce use of groundwater) but farmers are instead moving away from less water-intensive crops such as oilseeds, pulses and cotton.

In addition, farmers are planting maize in the spring season (February to June) as a third crop between the Rabi (winter) and Kharif (monsoon) crop season. Spring maize needs large amounts of water, up to 20 irrigation cycles. In 2025, farmers planted spring maize on nearly 0.9 million hectares, a staggering 40% increase compared to the average of the past five years. The situation is particularly worrying in Punjab, which is already facing severe groundwater depletion due to its addiction to growing rice.

Saini further said that sugarcane production in India is cyclical in nature, with yields taking a hit in deficit rainfall years. With cane yields tapering and limited possibility of area growth, the pressure is likely to fall on grains such as maize and rice to produce ethanol.

Trade concessions

Ethanol has been an element in India’s ongoing trade negotiations with the US. The country has been pushing India to purchase ethanol, since India is reluctant to allow import of GM corn and soy, on account of the low productivity of domestic farmers and because GM technology is yet to be allowed in food crops.

A working paper by Niti Aayog, published in May and withdrawn later, suggested that India could import GM soybeans, extract oil from them in coastal areas, and export the meal or soy DOC. This, the federal thinktank said, would prevent entry of GM feed and still allow India to offer some concessions to the US. The paper also suggested that India could allow access to GM corn from the US to produce ethanol and export the by-product (DDGS).

Understandably, ethanol manufacturers are opposed to the idea. “We are hopeful that the government will not allow import of either ethanol or GM corn. This is critical to protect the interest of domestic industry and farmers,” said C.K. Jain, president of the Grain Ethanol Manufacturers Association, an industry lobby.

A working paper by Niti Aayog, published in May and withdrawn later, suggested that India could import soybeans, extract oil from them in coastal areas, and export the meal or soy DOC.

Jain said that domestic entrepreneurs have set up huge capacities, with the number of grain-based ethanol plants going up from around 30 in 2023 to nearly 400 now. Currently India needs about 10 billion litres of ethanol for E20, whereas the combined production capacity of grain and sugar-based manufacturing is around 17 billion litres with another 5 billion litres of production capacity in the pipeline.

“We are asking the government to adopt higher E27 blending in the coming years, following the example of countries like Brazil, and encourage flex-fuel vehicles (which can run on higher blends of ethanol and petrol),” Jain said. He further argued that India is a grain surplus country and manufacturers can make do without rice to produce ethanol.

Not everyone agrees. Bharat Krishak Samaj’s Jakhar said that if ethanol manufacturers have set up excess capacity, they must also bear the consequences. Or, be ready to take a hit when crop supplies are restricted.

“The idea that nearly half of the food supply gets burned up in ethanol fuel is insane,” Marion Nestle, a professor of nutrition and food studies at the New York University, said in a podcast in June. Nestle was referring to the fact that close to half of the corn produced in the US is used to manufacture ethanol.

India is not far off. In ESY 2024-25, an estimated 14 million tonnes of maize is likely to be diverted towards making ethanol. This is close to a third of annual production.

Nestle’s words are a prescient warning as India decides on its future energy pathway: “It’s so insane because it’s a system that’s designed for profit… It forces corn to be grown in places where it should never be grown. Water is being extracted… just to go up in smoke.”