The Pulse | Economy | South Asia

Ethanol Issue Has Entered Indian Kitchens, Impacting Household Budgets

What began as an energy policy to reduce crude imports has travelled through the agricultural supply chain and ended up on the dinner table.

India’s ambitious plan to mix ethanol with petrol was touted as the country’s answer to reducing crude-oil imports, saving precious foreign exchange and, above all, bringing down petrol prices. Union Minister for Road Transport and Highways Nitin Gadkari, one of the biggest advocates of ethanol blending, had even said that the use of ethanol would bring down the price of petrol from around 110 Indian rupees or $1.15 per liter at present to just 15 rupees.

Gadkari is not the petroleum minister. His vociferous support for ethanol blending has raised many eyebrows. Opposition parties, including the Congress, have accused him of conflict of interest, alleging that the E20 fuel he is promoting benefits companies owned by his sons. Gadkari has dismissed these allegations as “politically motivated.”

However, instead of conferring benefits on consumers, the introduction of E20, a blend of 20 percent ethanol with petrol, is taking a heavy toll on vehicles and the household budget of middle-class Indians. E20 has had no impact on petrol prices or crude oil imports. On the contrary, it has triggered concerns over mileage, compatibility and its effect on older vehicles. This has forced consumers to opt for ethanol-free, ultra-premium fuel, which is, of course, expensive.

Apart from the economic effect, is its impact on the Narendra Modi government. It is the worst PR disaster the government has ever faced. Social media is flooded with reports of the high cost of ethanol production, besides the huge amount of water usage. According to reports, the average cost of producing or procuring ethanol is around 66 to 72 rupees per liter, which is higher than the refinery cost of around 52 to 55 rupees per liter of pure petrol when crude oil prices are near $70 a barrel.

The public outcry became louder when sugar prices surged dramatically in recent weeks, reaching around 70 rupees a kilogram in some markets. The government has responded by permitting duty-free imports of one million tons of raw sugar — the first such move in nearly a decade. Although the government tried to assure the public that the diversion of sugarcane has declined from around 12 percent in 2022-23 to about 9 percent in 2025-26, the damage was done.

The hue and cry over rising sugar prices had hardly subsided when egg prices rose by around 35-40 percent due to corn being used for ethanol production. Corn is not merely a crop that can be converted into fuel. It is also a crucial ingredient in poultry feed. Recent reports suggest that around 37 percent of India’s corn production is now going to ethanol distilleries. According to the poultry industry, corn accounts for roughly 65-70 percent of poultry production costs. For the first time, India, which was Asia’s top corn exporter, has become a net importer.

Recent reports suggest that around 37 percent of India’s corn production is now going to ethanol distilleries. Nitin Gupta of Olam Agri India says the poultry and starch industries are........

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