Rising Sugar Prices Amid Ethanol Blending Policy

Syllabus: GS3/Energy

Context

• The diversion of sugarcane and foodgrains towards ethanol production has raised concerns over rising sugar and food prices, highlighting the trade-off between  energy security and food security under India’s ethanol-blending programme.

What is Ethanol?

• Ethanol is 99.9% pure alcohol that can be blended with petrol. It can be produced from sugarcane, maize, wheat, etc which are having high starch content. 
• Alcohol production involves fermentation of sugar using yeast. In cane juice or molasses, sugar is present in the form of sucrose that is broken down into glucose and fructose. 

Ethanol Blending Programme

• Ethanol blending refers to the practice of mixing ethanol with gasoline to create a fuel mixture that can be used in internal combustion engines. 
• The ‘National Policy on Biofuels’ notified by the government in 2018 envisaged an indicative target of 20% ethanol blending in petrol by 2030.
  • In 2014 only 1.5 per cent ethanol was blended in petrol in India.
• Given the encouraging performance and various interventions made by the government the 20% target was achieved in 2025.
  • The programme has reportedly saved approximately ₹1.13 lakh crore in foreign exchange and reduced nearly 544 lakh metric tonnes of CO₂ emissions cumulatively.
• In June 2026, the government introduced E85 for flex-fuel vehicles; E100 is expected to be offered in the near future too.

Why is India Promoting Higher Ethanol Blends?

• Improving energy security: India imports almost 88.5% of its entire crude oil requirement.
  • Increasing the mixing of ethanol reduces reliance on imported oil and boosts energy resiliency.
  • It will also help to check outflow of foreign exchange and improve macro-economic stability.
• Farmers help: Production of ethanol provides alternative market for sugarcane, maize and surplus food grains and hence, provides economic help to farmers notably in areas like Uttar Pradesh and Maharashtra.
• Environmental Benefits : Ethanol is a renewable fuel and it creates fewer toxins than petrol. By combining higher we may reduce pollutants and make transit cleaner.
• Rural Industrialisation: The expansion of distilleries has contributed to the development of rural infrastructure and the generation of non-farm employment.
• India’s Global Biofuel Leadership:  India is a founding member of the Global Biofuel Alliance launched at the G20 Summit.
  • This program consolidates India’s status as a global leader in sustainable biofuels further.

Concerns Regarding Ethanol Blending

• Feedstock Volatility: Sugarcane production remains heavily monsoon dependent. Ethanol supply and blending targets are disrupted in drought years.
• Effect on food prices: Increased diversion of agricultural production results in increased costs of sugar and other food products.
• Mileage : Ethanol has less energy per litre than gasoline. Customers raised issues regarding the decline in mileage from E10 to E20 transition.
• Vehicle Compatibility Problems : Ethanol is extremely hygroscopic i.e. it readily absorbs moisture from the atmosphere.
  • Higher ethanol blends can damage engine components, fuel lines, rubber seals and metal parts in cars that are not meant to use such fuel.

Government Response

• The government has approved duty-free import of 10 lakh tonnes of raw sugar under a Tariff Rate Quota (TRQ) till 31 October to boost local availability and check prices as domestic sugar prices are rising.
• All these techniques point to the need for flexible policy coordination between ethanol purchases, sugar production, imports and food-price management.

Way Ahead

• Second-generation ethanol shift to agricultural waste, crop waste and other non-food feedstock, to avoid competing with food crops.
• Policy flexibility::  Ethanol blending targets should be flexible to food costs, availability of sugar, supply of feedstock, and environmental sustainability.
• Increase water use efficiency: Promote water-efficient sugarcane production by micro-irrigation and improved cropping practices, particularly in water-stressed regions.

Source: TH