Cheap crude complicates India's maize-to-ethanol strategy as blending costs outrun petrol

India's drive to cut its imported crude bill has created a new import dependence — in maize — while the ethanol blended into petrol costs more than the fuel it displaces, The Hindu reports.

Ethanol costs more than the crude it replaces

The government buys maize-based ethanol at a fixed ₹71.86 a litre, the highest rate it pays for any feedstock, according to figures submitted to the Lok Sabha. A litre of crude oil costs the country around ₹55 even with the impact of the West Asia crisis, and under ₹45 in calmer markets. The Ministry of Petroleum and Natural Gas has conceded that with crude near $70 a barrel, blending ethanol into petrol costs more than producing petrol without it. E20 — 80% petrol and 20% ethanol — has stayed expensive despite the fall in crude prices, which The Hindu attributes to the low yield of Indian maize, insufficient capacity to absorb ethanol demand, and the need to balance domestic sugar consumption against exports.

From maize exporter to net importer

Maize now supplies close to half of all ethanol blended into Indian petrol, up from almost nothing three years ago, government data show, making it the single-largest ethanol feedstock. Counting surplus rice from the Food Corporation of India and damaged food grains, grain accounts for nearly 70% of Indian ethanol output. The shift was deliberate: the June 2021 report “Roadmap for Ethanol Blending in India 2020-25”, prepared by NITI Aayog with the Petroleum Ministry, found that sugarcane alone could not carry the 20% blending target and urged a move to less water-hungry crops such as maize. India reached that target, branded E20, in 2025 — five years early.

The agronomy is less favourable than the roadmap implies. Maize is a kharif crop, largely rainfed and faster-growing than cane, and uses less groundwater, but it yields about 3.5 tonnes per hectare against sugarcane's 80.

• Maize exports fell from about $764 million in 2022-23 to roughly $201 million in 2024-25 — some 550,000 tonnes, about a quarter of the earlier value — according to trade data compiled from the Agriculture and Commerce Ministries.
• India became a net maize importer in 2024 for the first time in decades, buying around 0.9 million tonnes worth some $220 million, much of it from Myanmar and Ukraine.
• Domestic maize prices have climbed from about ₹15,000 to ₹25,000 a tonne in four years.
• Roughly 12.7 million tonnes of maize — close to a third of national production — is now contracted for ethanol.

The buyers abroad are poultry and animal-feed producers, who compete with distilleries for the same grain and for whom feed accounts for 60–70% of production costs.

Sugar mills squeezed, half of capacity idle

Mills that profited under the E5 and E10 policies are seeing returns shrink. Prices for the sugarcane-based ethanol routes have been frozen since 2022, even as the guaranteed price mills must pay cane growers has risen 16.5%. The Indian Sugar and Bio-Energy Manufacturers Association (ISMA) says ethanol from B-heavy molasses now costs about ₹66 a litre to make but sells at a fixed ₹60.73. Balrampur Chini Mills, a leading producer, reported ethanol profit falling from about ₹3.26 billion in 2023-24 to ₹1.92 billion the following year.

Capacity has run well ahead of demand. ISMA puts installed ethanol capacity at nearly 20 billion litres a year against annual demand of about 11–12 billion litres, leaving distilleries at roughly half utilisation and some 4.5 billion litres idle. With flex-fuel vehicles virtually absent from the Indian fleet, producing more ethanol is counterproductive.

Chemistry and the Brazilian comparison

Ethanol burns more cleanly than petrol — its molecule carries two carbon atoms against the seven or eight averaged by petrol's heavier hydrocarbons, so it releases less carbon dioxide per litre. The Hindu reports that the same chemistry leaves ethanol delivering just a third of the energy per litre because, as the U.S. Department of Energy and Argonne National Laboratory explain, the molecule already contains an oxygen atom and is partly oxidised.

Brazil, the model India cites, runs the policy differently. The U.S. Department of Agriculture says Brazilian ethanol prices are set by the market rather than the state, and vehicles there can run blends of 85% ethanol or pure ethanol, so drivers buy it only when it is cheap enough to offset the lower fuel economy. At Indian pumps, E20 sells at the same price as ordinary petrol, roughly half of which is tax. The government says blending has saved well over ₹1 lakh crore (₹1 trillion) in foreign exchange and lifted farm incomes — gains that flow to the exchequer and to farmers rather than to the motorist.