Atmanirbharta in fuel must strengthen, not undermine, India’s food security

Why in the News

The all India modal retail price of sugar has climbed from around Rs 45 a kg to about Rs 65 a kg within a month, an increase of nearly 44 per cent. The Union government has attributed the rise to hoarding by traders and millers and has threatened strict action. The rise follows a tightening of supply on three counts at once, arriving just before the festive season when sugar demand typically rises. The tension is that the same government fixes cane prices, sugar sales, imports, exports and the allocation of feedstock to ethanol, so a price spike inside a fully administered chain is a policy outcome rather than a market one.

What is the Ethanol Blended Petrol Programme?

1. What it requires: Oil marketing companies blend a mandated share of ethanol into the petrol they sell, which substitutes domestically produced fuel for imported crude.
2. What it runs on: Ethanol is produced from sugarcane juice, syrup and molasses, and from surplus foodgrain such as rice and maize.
3. How fast it scaled: Blending stood at 1.53 per cent in 2013-14, reached around 5 per cent by 2019-20 and 20 per cent in 2025-26, and feedstock supply did not keep pace with that trajectory.

Why did sugar prices spike?

1. The opening cushion had halved: Stocks at the start of the current sugar year, which runs October to September, were 5 million tonnes against 8 million tonnes a year earlier, leaving little room to absorb a fresh shock.
2. Production came in below estimate: The 2025-26 output estimate was cut from about 34.3 million tonnes to 30.6 million tonnes on damage from red rot, a fungal disease that rots the cane stalk and destroys sucrose, and from top borer. About 27.35 million tonnes had been produced by June, so 3.25 million tonnes would have to arrive between July and September against a six season average of only 0.38 million tonnes for those months, pointing to a further cut to between 28 and 29 million tonnes.
3. Ethanol removed supply at the worst moment: The ethanol programme diverted about 2.75 million tonnes of sugar at a time when supplies were already tight. That diversion is what turns energy policy into a competitor of the food market.

Why can the market not correct the shortage on its own?

1. Price signals are not allowed to act: In a more open economy a production shortfall corrects itself as higher prices pull in imports and trim consumption.
2. Every step is administered: Sugarcane pricing, sugar sales, imports, exports and ethanol feedstock allocation are all decided by the government, so a correction has to be ordered rather than triggered.
3. The calendar closes the escape route: Fresh cane will not reach mills in significant quantity until mid October, so the market must run on existing stocks through the festive demand peak.

What correction does the assessment call for?

1. Imports opened too narrowly: One million tonnes of duty free raw sugar has been allowed, against an assessed requirement of at least 3 to 4 million tonnes of refined sugar reaching the open market before and during the festive season. The 100 per cent import duty on refined sugar should be cut to zero or to 5 per cent.
2. Shift the ethanol feedstock temporarily: Sugar based ethanol should be reduced sharply, with rice from Food Corporation of India (FCI) stocks held far above buffer norms taking its place. FCI should charge ethanol plants at least the procurement price of rice, if not its full economic cost.
3. Import ethanol or lower the mandate: Ethanol can be imported directly when domestic feedstock is pushing up food prices, or the blending share can be brought down from 20 per cent to about 15 per cent.

Does switching feedstock end the food versus fuel trade off?

1. Maize is the least thirsty option: Maize does not consume as much water as rice or sugarcane, and it is already being used as a primary ethanol feedstock.
2. Yield is the binding constraint: Maize productivity in India hovers around 3.5 tonnes per hectare against about 11 tonnes per hectare in the United States, so the surplus that fuel demand needs does not exist.
3. The pressure moves to protein: Diverting more maize without a matching rise in output raises maize prices, and that passes into poultry meat, eggs and milk, where maize is the main feed.
4. The trade off relocates rather than ends: Moving from sugar to rice or maize shifts the food versus fuel choice to a different crop, and closing it requires a large maize surplus, which raises the question of whether India will permit the genetically modified maize that drives United States yields.

How should the ethanol programme be recalibrated?

1. The basic number is missing: The net energy balance of each feedstock, meaning the energy returned against the energy spent producing it, has not been established, so allocation is being decided without it.
2. Let the buyer choose the feedstock: Oil marketing companies could be given flexibility to source ethanol from the most economical feedstock, subject to safeguards for food security, farmers and the environment, in place of a rigid allocation from sugar, rice and maize.
3. The state’s role narrows to the buffer: Government should hold strategic buffers and enforce food security safeguards rather than manage every feedstock allocation, and the programme itself needs a full evaluation of its design.

Challenges to the Ethanol Blended Petrol Programme

1. Capacity was financed against a fixed mandate: Distillery capacity was built on the assurance of a fixed blending share and long term offtake, so any temporary cut leaves loans outstanding against idle plants. Eg. The Ethanol Interest Subvention Scheme financed new and expanded distilleries through soft loans carrying a 6 per cent interest subvention. Fix. Convert the fixed target into a band with a stated floor, so capacity is financed against the floor rather than against a single number.
2. The efficiency cost sits with the vehicle owner: Ethanol carries lower energy density than petrol, so mileage falls in engines not calibrated for the blend. Eg. Vehicles built before E20 compatibility became standard draw the same blend at the pump with no compensating price difference. Fix. Retain a lower blend grade at outlets serving older fleets, and publish blend specific mileage data at the pump.
3. Two administered prices move at different speeds: The government fixes both the cane price and the ethanol procurement price, and only the cane price has been revised upward in successive seasons. Eg. Mills carrying distillation capacity report underutilisation as the margin on ethanol narrows. Fix. Index the ethanol procurement price to the cane price fixed under the same control order.
4. The gains cluster geographically: Distillery capacity follows cane and grain surpluses, so the income the programme creates concentrates in a few States. Eg. Uttar Pradesh and Maharashtra, the two largest cane producing States, hold the bulk of cane based distillation capacity. Fix. Weight new capacity approvals toward maize growing districts, where the water saving is also largest.

Conclusion

Fuel self reliance and food security are traded against each other because the blending target was fixed as a number and the feedstock left to catch up. What to watch is whether the correction stops at emergency imports or reaches the design: a blending band replacing a fixed share, and feedstock chosen by the buyer against a stated food security safeguard. The maize yield gap decides whether the trade off can be closed at all rather than merely moved.

The Sugar Industry in India

1. Scale and geography: India is the second largest sugarcane producer, with output of 454.61 million tonnes in 2024-25, drawn mainly from Uttar Pradesh and Maharashtra.
2. The dependent population: About five crore cane farmers and their families depend on the crop, alongside mill and ancillary unit workers.
3. Mills are multi product units: Beyond sugar, a mill earns from ethanol, bagasse co-generated power, and press mud biogas and bio-fertiliser.

Laws and Rules Governing the Sugar and Ethanol Sector

1. Essential Commodities Act, 1955: Sugar is a scheduled commodity under it, so the Centre can impose stock limits and regulate sale and distribution.
2. Sugarcane (Control) Order, 1966: Issued under that Act, it is how the Centre fixes the Fair and Remunerative Price payable by mills to cane growers.
3. National Policy on Biofuels, 2018: Sets ethanol blending targets and permits cane juice, syrup, molasses and surplus foodgrain as feedstock, its 2022 amendment advancing the 20 per cent target.
4. Foreign Trade (Development and Regulation) Act, 1992: Sugar exports are regulated through notifications issued under it, which placed raw, white and refined sugar in the prohibited category.

Government Initiatives for the Sugar Sector

1. Sugar Development Fund: Provides concessional loans for mill modernisation, crushing capacity expansion, co-generation and cane development.
2. Pradhan Mantri JI-VAN Yojana: Supports second generation ethanol from crop residue rather than food grade feedstock.

Challenges in the Sugar Sector

1. Cane price and sugar price move independently: The Fair and Remunerative Price rose from Rs 285 a quintal in 2020-21 to Rs 340 in 2024-25 and Rs 355 for 2025-26, and the minimum selling price of sugar has stayed at Rs 31 a kg since 2019. Eg. Cane arrears recur in Uttar Pradesh whenever mill realisation lags the obligatory cane price. Fix. Adopt the Rangarajan Committee’s revenue sharing formula, linking cane payment to realisation from sugar and by-products.
2. Export policy doubles as an inflation tool: Raw, white and refined sugar sit in the prohibited export category to protect domestic stocks and ethanol feedstock, costing mills global market access. Eg. Exporters lose long term contracts each time the category is switched mid season. Fix. Announce an export quota at the start of each sugar season against a stated closing stock norm, letting mills contract ahead.
3. The highest recovery belt is the most water stressed: Maharashtra, Karnataka and Tamil Nadu record higher sucrose recovery and face the sharpest groundwater depletion. Eg. El Nino years have cut cane availability in Maharashtra and Karnataka and closed crushing seasons early. Fix. Make drip irrigation and fertigation under the Pradhan Mantri Krishi Sinchayee Yojana a condition for cane area expansion, with early maturing drought resistant varieties.
4. The northern belt crushes longer and recovers less: Uttar Pradesh and Bihar run longer crushing seasons on lower sucrose recovery, with fragmented landholdings raising cane aggregation costs. Eg. A single national recovery benchmark treats a Bihar mill and a Kolhapur mill as comparable. Fix. Set belt specific recovery, crushing and payment benchmarks rather than one national norm.

Matching Previous Year Question

“[2025] Consider the following statements: Statement I: Of the two major ethanol producers in the world, i.e., Brazil and the United States of America, the former produces more ethanol than the latter. Statement II: Unlike in the United States of America, where corn is the principal feedstock for ethanol production, sugarcane is the principal feedstock for ethanol production in Brazil. Which one of the following is correct in respect of the above statements? (a) Both Statement I and Statement II are correct and Statement II explains Statement I (b) Both Statement I and Statement II are correct but Statement II does not explain Statement I (c) Statement I is correct but Statement II is not correct (d) Statement I is not correct but Statement II is correct ANSWER: (d)”