India Prioritises Food Over Fuel as El Niño Hits Ethanol Production

India’s ethanol blending programme is facing a setback as severe El Niño conditions and poor monsoon rainfall affect sugarcane and corn production. With monsoon rainfall 13% below normal, crop shortages have pushed corn and sugar prices to record highs, forcing the government to prioritise food security over biofuel production. As a result, ethanol blending in petrol could fall from the targeted 20% to around 15%–17% during the current supply year.

The potential decline could affect Prime Minister Narendra Modi’s energy-security ambitions to reduce dependence on imported crude oil. India’s E20 programme has reportedly saved nearly ₹2 trillion in oil import costs since 2014. However, rising food inflation, which reached 7.74% in September, has increased pressure on the government to ensure adequate food supplies. Authorities have also stopped procuring ethanol produced from sugar-based feedstocks and reduced the purchase price of corn-based ethanol.

The move is expected to put pressure on ethanol producers, many of whom expanded their production capacity in anticipation of higher demand. Industry estimates suggest corn production could decline by up to 15%, while drought conditions may discourage farmers from expanding cultivation. With food prices rising and agricultural supplies tightening, India faces the challenge of balancing its renewable energy goals with the need to protect food security.

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