Traditional export markets such as Vietnam, Bangladesh, Nepal, and Malaysia, which bought corn from India because of its prompt availability, are now compelled to source supplies from South America and the United States.
India’s ambitious drive to increase corn-based ethanol production has shifted its status from Asia’s leading corn exporter to a net importer, disrupting domestic industries and global trade patterns. This unprecedented transition highlights the far-reaching implications of the country’s ethanol policy changes.
India’s Growing Corn Imports
India’s decision to boost ethanol production from corn, motivated by an increase in procurement prices earlier this year, has altered the landscape of its agricultural economy. This policy aims to reduce reliance on sugarcane-based ethanol for gasoline blending, ensuring sufficient sugar supply for the domestic market and cutting carbon emissions.
Traditionally, India exported between 2 and 4 million metric tons of corn annually. However, in 2024, exports are projected to plummet to just 450,000 tons. Meanwhile, imports are expected to reach a record 1 million tons, primarily sourced from Myanmar and Ukraine, which supply non-GM corn. This new demand has caused significant ripples in global markets, with former buyers like Vietnam and Bangladesh now turning to the U.S. and South America for their supplies.
Domestic Challenges
The ethanol push has intensified competition for corn among India’s poultry, starch, and ethanol industries. With local corn prices surging above global benchmarks, poultry producers are urging the government to remove import duties and lift restrictions on genetically modified (GM) corn to widen sourcing options.
Nitin Gupta, Senior Vice President of Olam Agri India, notes that ethanol distilleries now require between 6 and 7 million tons of corn annually. This increased demand has created a shortfall of approximately 5 million tons, according to the All India Poultry Breeders Association, and has driven up prices, making production costs unsustainable for poultry farmers and starch producers.
Key Issues with India’s Ethanol Push
1. Disrupted Trade Dynamics: India’s shift to corn imports disrupts trade relationships and impacts its traditional export markets. For instance, countries like Malaysia and Nepal, which relied on India’s prompt corn deliveries, must now source supplies elsewhere.
2. Food vs. Fuel Debate: The increased diversion of food crops like corn for ethanol reignites the “food versus fuel” debate. The competition between ethanol distilleries and food industries is driving up food prices, with broiler chicken costs rising significantly. This shift raises questions about prioritizing fuel production over food security in a nation grappling with malnutrition.
3. Environmental Concerns: The production of ethanol from crops like sugarcane and corn has adverse environmental impacts. Water-intensive sugarcane cultivation exacerbates water scarcity in drought-prone regions, while fertilizer and pesticide use degrade soil quality and pollute water resources. Additionally, energy-intensive ethanol conversion processes could offset some of its carbon-saving benefits.
4. Economic Disruptions: The poultry and starch industries, significant consumers of corn, face supply shortages and escalating costs. The All India Poultry Breeders Association has called for duty-free imports of 5 million tons of corn to mitigate these challenges. The resulting economic disruptions extend beyond agriculture, potentially affecting employment and food price stability.
5. Policy Inconsistencies: India’s rapid shift in ethanol policy has led to regulatory uncertainties. Restrictions on GM corn imports limit supply options, while abrupt policy changes, such as curbing sugarcane use for ethanol, create supply chain bottlenecks.
6. Infrastructure Deficits: India’s ethanol ambitions face significant infrastructure challenges. The country lacks adequate blending facilities, storage capacity, and distribution networks to meet its blending target of 20% ethanol in gasoline by 2025-26, potentially undermining the initiative’s success.
Pathways to Sustainable Ethanol Production
To address these challenges, India can adopt several strategies:
1. Diversify Feedstocks: Scaling up second-generation (2G) ethanol from agricultural residues and third-generation (3G) ethanol from algae can reduce dependence on food crops. Incentives for private investment in these technologies could accelerate their adoption.
2. Implement Precision Agriculture: Utilizing precision farming techniques such as IoT sensors and AI-driven analytics can optimize resource use in feedstock cultivation. For example, Maharashtra’s drone-based sugarcane farming initiative has demonstrated significant water savings.
3. Strengthen Water Management: Mandating water recycling in distilleries, promoting drip irrigation, and incentivizing water-efficient crops for ethanol production can alleviate water stress. Madhya Pradesh’s successful ‘Kapildhara’ scheme for drip irrigation offers a scalable model.
4. Encourage Flex-Fuel Vehicles (FFVs): Introducing policies to mandate FFV compatibility in new vehicles can create a stable demand for ethanol. Brazil’s widespread adoption of FFVs provides a compelling example of this approach.
5. Develop Zonal Ethanol Strategies: Regionalizing ethanol production based on eco-regional suitability can optimize resource use and minimize transportation costs. For instance, drought-prone areas could focus on sorghum, while rice residues could serve as feedstock in surplus regions.
6. Build Integrated Biorefineries: Establishing biorefineries that combine ethanol production with biogas, bioplastics, and CO2 capture can enhance the economic and environmental viability of ethanol initiatives.
7. Invest in Smart Blending Infrastructure: Deploying automated blending systems and blockchain-based tracking can streamline ethanol production and distribution, reducing inefficiencies.
8. Introduce Crop Insurance for Ethanol Feedstocks: Specialized insurance schemes for crops like sugarcane and sorghum can encourage farmers to grow ethanol feedstocks without fearing financial losses due to weather or market fluctuations.
9. Promote Circular Economy in Distilleries: Mandating zero-liquid discharge processes, utilizing distillery waste for biogas, and repurposing by-products as organic fertilizers can make ethanol production more sustainable.
