The article is titled “Food vs. Fuel: Recalibrating India’s Ethanol Blending Strategy.”
According to the ICRIER study, the government should be flexible in its ethanol-blended gasoline program by maintaining the E20 target as a long-term goal while allowing a temporary reduction to E15 when domestic ethanol availability is insufficient.
The paper, titled “Food vs. Fuel: Recalibrating India’s Ethanol Blending Strategy,” says the choice between retaining E20, importing ethanol, and temporarily reducing blending should ultimately depend on their relative economic costs under prevailing conditions.
“Such a mechanism would allow the program to respond to temporary agricultural shocks without compromising the long-term goal,” said the paper, co-authored by agricultural economist Ashok Gulati.
India has rapidly expanded its ethanol blended gasoline (EBP) program. Ethanol is produced from agricultural products such as sugarcane, corn and surplus rice.
“The final guarantee should be flexibility in the blending rate itself.
“The 20 percent target may remain a long-term goal, while a temporary reduction to E15 may be considered in years when domestic ethanol availability becomes insufficient or the cost of maintaining E20 becomes disproportionately high in terms of food and/or feed prices,” the document notes.
The program aims to reduce dependence on imported fossil fuels and increase the use of domestically produced renewable fuels. The government has set a target for E20: gasoline must contain up to 20 percent ethanol by volume. India achieved this target in the Ethanol Supply Year (ESY) (November to October) 2025-26, five years ahead of the original schedule.
Taken together, the paper says these measures point to a more adaptive EBP design.
“Sugar-based ethanol can remain important when sugar supplies are plentiful, but sugar leakage should be limited when supplies become tight,” the report said, adding that corn should absorb a larger share of ethanol demand as its productivity and market supply improve, while FCI rice should remain largely a residual market for genuine surplus supplies, but rice prices should be raised to at least the cost of acquiring it.
The document highlights the need for a flexible commodity strategy that can support E20 without putting undue pressure on food markets when agricultural supplies are tightening.
The ethanol market has already reached significant size with OMCs procuring 6.79 billion liters (679.04 crore litres) in ESY 2023-24, 10.33 billion liters (1033.31 crore litres) in 2024-25. and 7.05 billion liters (705.43 crore litres) up to June 2026, with corresponding costs of about ₹48,757 crore, ₹73,996 crore and ₹49,577 crore respectively, including VAT and transport.
Between 2019-20 and 2025-26, ethanol supply to oil marketing companies increased from 1.73 billion liters (173.03 crore litres) to a projected 12 billion liters (1200 crore litres). This means an average annual growth rate of about 38 percent over six years.
In contrast, the paper explains that production of agricultural products such as sugarcane, corn and rice, used to make ethanol, grew much more slowly.
“During the same period, corn production grew by a CAGR of 11.4%, rice by 4.4% and sugarcane by 5.1%. This widening gap in the growth of demand for ethanol for blending and the supply of feedstocks to meet that demand is resulting in a growing trade-off between food and fuel.
“The trade-off is already obvious in the sugar market. Here, low opening stocks and lower production coincided with a 44 per cent rise in modal retail sugar prices, from £45/kg in July to £65/kg by 29 August,” it noted.
The paper argues for a more adaptive and market-oriented approach to ethanol blending policy.
He recommended using sugar imports as an immediate buffer in times of shortage; limiting FCI rice primarily to actual surplus stocks while bringing its prices at least closer to acquisition costs; bringing the distribution of raw materials into line with agricultural conditions; and greater openness to feedstock and ethanol imports.
Published September 8, 2026