The Feedstock Pivot: Balancing Energy Security with Agricultural Sustainability

India’s ethanol programme has entered its most delicate phase. The shift from a sugar-dominated feedstock model to one led by maize and other grains has strengthened energy security, but it has also introduced new pressures on agriculture, food prices, and water resources. The central challenge is no longer about achieving blending targets alone, but about ensuring that fuel security does not come at the cost of long-term agricultural sustainability.

By 2026, grain-based ethanol has overtaken sugar as the primary driver of India’s blending programme. Maize alone accounts for more than 45 percent of ethanol allocation in the current cycle, while sugar-based feedstocks have been capped at around 28 percent. This pivot has stabilised fuel supply, yet it has also sharpened the debate around food, water, and farmer livelihoods.

Why Grain-Based Ethanol Has Gained Priority

The move toward grain was driven by structural limitations in the earlier sugar-dependent model. Ethanol availability was closely tied to the sugarcane cycle, making the programme vulnerable to droughts, erratic monsoons, and regional crop failures. A weak sugarcane season in key producing states could derail blending targets entirely.

Grains offered a way out of this constraint. Maize and rice can be stored, transported, and processed throughout the year, enabling consistent supply regardless of seasonal variations. Their geographic spread across multiple states has also allowed distillery capacity to expand closer to fuel depots, improving logistical efficiency.

Water stress has further accelerated this shift. Sugarcane is among the most water-intensive crops, while maize requires significantly less water per litre of ethanol produced. As groundwater depletion becomes a growing concern, the pivot toward grain has aligned fuel policy with broader environmental priorities.

Implications of Reduced Sugar-Based Ethanol Share

The reduced share of sugar-based ethanol has had far-reaching consequences for the sugar sector. Investments exceeding ₹40,000 crore were made by sugar mills to expand distillery capacity, with ethanol expected to act as a stabilising revenue stream during periods of low global sugar prices. Lower allocations have left much of this capacity underutilised.

At the same time, procurement prices for sugar-based ethanol have remained largely stagnant, even as the Fair and Remunerative Price paid to sugarcane farmers has increased. This mismatch has eroded margins for mills and heightened the risk of delayed payments to farmers, affecting over five crore sugarcane-growing households.

From a policy perspective, the decision to cap sugar diversion was driven by food security considerations. Following erratic monsoons and lower-than-expected sugar output, maintaining adequate domestic sugar stocks became a priority to prevent price inflation. While necessary, this safeguard has intensified financial pressure within the sugar ecosystem.

The Food vs Fuel Debate in the Indian Context

In India, the food versus fuel debate is not theoretical. It plays out daily through decisions on grain allocation, pricing, and water use. The diversion of maize toward ethanol has raised concerns among poultry and livestock producers, as higher feed costs translate into rising prices of protein-rich foods.

The role of the Food Corporation of India has therefore become critical. Strict oversight ensures that grain suitable for the public distribution system is not diverted for fuel. Only surplus, damaged, or non-edible stocks are channelled toward ethanol, preserving food availability while supporting energy needs.

Water adds another layer to this debate. Producing ethanol from water-intensive crops in drought-prone regions risks long-term damage to food security. This reality has reinforced the case for maize and for accelerating the transition toward second-generation ethanol derived from agricultural residues rather than food crops.

Managing Dual Interests: Sugar Mills and Grain Distilleries

By 2026, the ethanol industry has become a dual-track system, with sugar mills and grain distilleries operating under different cost structures, risks, and expectations. Pricing disparities between sugar-based and grain-based ethanol have emerged as a major friction point, with both sides arguing that current rates barely cover rising input costs.

The allocation methodology has further complicated matters. Established sugar mills often feel crowded out by newer grain-based plants, particularly those set up in deficit zones. Without a mechanism that prioritises proven capacity, internal competition risks weakening the sector as a whole.

The most resilient operators have adopted a hybrid approach. Multi-feedstock distilleries capable of processing sugarcane during the harvest season and switching to maize or damaged grain in the off-season have emerged as a practical solution to balancing utilisation and national priorities.

The Need for Flexible, Feedstock-Neutral Policy Design

Rigid feedstock-specific mandates are increasingly seen as incompatible with climate volatility and agricultural uncertainty. A feedstock-neutral approach shifts focus from the source of ethanol to the quality, efficiency, and sustainability of the final fuel.

Such flexibility allows the system to respond dynamically to crop availability, water stress, and price movements. It also creates space for integrating second-generation ethanol from crop residues and, eventually, third-generation biofuels, reducing long-term dependence on food crops altogether.

For this model to work, regulatory agility is essential. Faster approvals for feedstock switching, unified quality standards, and pricing frameworks that reflect energy value rather than crop origin are key to sustaining both energy and agricultural objectives.

AIDA’s Role in Maintaining Sectoral Balance

As the apex national body representing more than 390 distilleries and a majority of India’s distillation capacity, All India Distillers’ Association plays a central role in managing this transition. AIDA acts as a stabilising force between competing interests, advocating for balanced allocation, fair pricing, and protection of existing investments.

The association supports a more equitable feedstock mix, safeguards sugar-sector viability, and promotes multi-feedstock agility across its membership. It also works closely with policymakers to accelerate the transition toward non-food biomass, ensuring that future growth in ethanol blending does not strain food systems or water resources.

The feedstock pivot has strengthened India’s energy security. Ensuring that it remains sustainable will depend on policy flexibility, technological progression, and continuous coordination across agriculture, energy, and industry—an effort in which AIDA remains a central pillar.