India increases the prices for ethanol to bolster the fuel-bending programme

The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, recently approved an increase in the price of ethanol, a by-product of sugar, purchased by state-run fuel retailers from sugar mills. This decision is expected to support India’s fuel-blending program and ensure better remuneration for farmers to offset rising cultivation costs.

The government’s ethanol-blending initiative aims to reduce the country’s reliance on imported crude oil. India, the world’s third-largest oil importer, has been actively working to cut its dependence on foreign petroleum through this program. For the ethanol supply year 2024-25 (November 1, 2024, to October 31, 2025), the administered price of ethanol derived from C-heavy molasses—a by-product of sugarcane crushing—has been raised to Rs. 57.97 per litre, up from Rs. 56.58 per litre, marking a 2.5% increase.

To incentivize ethanol production, the Union government introduced a modified scheme in January 2021, offering cheaper loans to sugar mills for setting up ethanol-blending facilities. Under this scheme, oil marketing companies (OMCs) are assured buyers of ethanol for the next 10 years, ensuring the viability of such projects. Ethanol, which can also be produced from grains like rice and maize, currently sees about 3% of its production derived from grain-based sources, primarily using federal grain stocks. By 2025, nearly 6 million tonnes of sugar by-products (18% of the total) are expected to be utilized for ethanol production.

To further boost ethanol blending, the government has taken several measures, including increasing distillation capacity to 17.13 billion litres annually and signing long-term agreements to establish dedicated ethanol plants in ethanol-deficit states, as stated by Union Information and Broadcasting Minister Ashwini Vaishnaw.

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India is also focusing on increasing the use of maize for ethanol production, with plans to ramp up output nearly tenfold over the next five years. The government has approved new research projects worth Rs.24.51 crore to develop climate-resilient, high-starch maize hybrids and improve maize production in ethanol industry catchment areas.

The Indian Institute of Maize Research (IIMR) has been allocated Rs. 15.46 crore to enhance maize production in 78 districts across 16 states. Additionally, Rs5.32 crore has been earmarked for research on climate-resilient maize hybrids by 2025-26, and Rs3.73 crore has been allocated to scale up the silage and maize feed value chain.