India's Ethanol Gamble: Can Sugarcane Feed Both the Nation and Its Fuel Tanks?

Abstract

India's Ethanol Blended Petrol (EBP) programme has been a policy success with blending rates going from the single digit a decade back to 19.24% in ESY24-25. Similarly, production capacity has also increased by nine times since 2013. In addition, over ₹1.36 lakh crore has been transferred to farmers since 2014-15. Nevertheless, sugar supply is getting tighter now. Sugar production for the ongoing sugar season has been downgraded from 343 lakh tonnes to 306 lakh tonnes on account of red rot, top borer infestation and waterlogging due to heavy rainfall. This has reduced the usual surplus cushion between sugar production (320-340 lakh tonnes) and domestic demand (280-290 lakh tonnes). The government has expanded the use of maize as ethanol feedstock. The diversion of sugarcane for ethanol was reduced by the Government from around 12 per cent in 2022-23 to around 9 per cent this year. However, this merely shifts the food-vs-fuel problem to another crop and another stakeholder. The debate on sugarcane farmers is absent from the current policy discussion. The sugarcane farmers are dependant on the diversion of their produce to ethanol for the solvency of the mill. Moreover, they demand timely payment (97% of cane dues to be cleared by August 20, 2026). Consequently, rigid restrictions on feedstock diversion can be ruinously costly. This is applicable whether the restrictions are imposed in a down or up direction.