Economic Survey: A word of caution on food self-reliance risk from India's ethanol-blending push

New Delhi: India’s expanding ethanol blending programme for automobile fuel could pose risks to its food self-reliance if not carefully managed, as farmers increasingly shift from pulses and oilseeds to maize to benefit from rising prices of maize-based ethanol, the government's Economic Survey released on Thursday cautioned.

The country’s move towards 20% ethanol blending in petrol has necessitated a move beyond sugar-based ethanol to that based on food grains such as maize, the annual document said. Prices of maize-based ethanol have seen a brisk rise in the last few years.

“Pulses and oilseeds are structurally important to India’s consumption basket and nutritional outcomes, yet they are shifting lower down the priority order for the nation’s cultivators,” the survey said.

“Over time, this imbalance risks entrenching India’s dependence on edible oil imports and exposing domestic food prices to greater volatility during supply shocks. This highlights an emerging tension between Aatmanirbharta in energy and Aatmanirbharta in food,” the Economic Survey said.

The document, authored by chief economic adviser V. Anantha Nageswaran and his team, lauded the reduction in India’s imports of crude oil that has helped in increasing self-reliance in the energy sector.

Ethanol blending programme began in 2003, with 5% blending of the green fuel in petrol, which rose to 20% by 2025.

As of August 2025, ethanol blending had helped India saver more than ₹1.44 lakh crore in foreign exchange and facilitated substitution of about 245 lakh tonnes of crude oil, the survey said.

The Economic Survey, however, brought in closer scrutiny on the impact the programme was having on farmers' preference for crops. The increasing preference for maize has come as government-administered prices of maize-based ethanol rose by a CAGR of 11.7% between FY22 and FY25, much faster than the growth seen in ethanol derived from rice or molasses. This has pushed farmers to prioritize the crop.

While the survey noted that the farmers' shift will not have much impact on the country's food security, it did highlight early warning signals on the trend. “Maize has recorded rapid growth in both production and cultivated area between FY22 and FY25, growing at a CAGR of 8.77% and 6.68%, respectively. During the same period, pulses have experienced a decline in output and acreage, while both oilseeds and cereals, excluding maize, have shown modest growth,” the survey noted.

The note of caution comes at a time when there are calls to increase ethanol-blending in fuel even as auto companies face backlash from consumers over loss of mileage due to use of fuel with higher blending.

The note of caution comes as the Centre has opened discussions on whether India should move to higher ethanol blends in petrol from the current E20 standard of 20% ethanol and 80% petrol, Mint reported on 11 December.

The survey pitched for a balanced approach, going forward, and said the government should take note of the growing shift to maize. “As the ethanol programme matures, there is a strong case for developing a comprehensive roadmap that takes a holistic view of energy security and food security,” it said.

As per the document, such a roadmap should take note of the undue advantage some feedstocks may have in pricing, along with improving yield in pulses and oilseeds, to restore their relative profitability.

Deepak Ballani, director general of the Indian Sugar & Bio-Energy Manufacturers Association (Isma) said India’s ethanol-blending programme has been carefully structured to support energy security and farmer incomes without compromising food self-reliance. Sugar-based ethanol is primarily produced from surplus sugar and molasses, ensuring that staple food crops such as pulses and oilseeds are not displaced, he said.

“Sugarcane-based ethanol plays a stabilizing role in both sugar and energy markets, improving mill liquidity and ensuring timely cane payments while reducing fossil fuel imports,” Ballani said.

While grain-based ethanol can supplement supply to meet blending targets, Isma underscored the need for a calibrated feedstock approach that protects nutritional security and crop balance.

"With productivity-led growth, sugarcane ethanol remains a sustainable and reliable pathway for India’s biofuel transition,” said Ballani.