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Informist, Wednesday, Nov. 12, 2025

 

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--Ethanol body chief: Higher ethanol demand unlikely to push up maize price
--CONTEXT: Grain Ethanol Manufacturers Association head Jain to Informist
--Ethanol body chief: FCI rice supply for ethanol reduces dependence on maize
--Ethanol body chief: FCI rice helps keep maize, grain prices in check
--Ethanol body chief: Need 14-15 mln tn maize for ethanol output in 2025-26
--Ethanol body chief: Used 13-14 mln tn maize for ethanol output in 2024-25
--Ethanol body chief: Maize output seen up 4-5 mln tn in 2025-26
--Ethanol body chief:Surplus maize output to keep price stable for all users
--Ethanol body chief: Margins thin for ethanol from FCI rice than from maize
--Ethanol body chief: Making ethanol from FCI rice needs more working capital
--Ethanol body chief: Industry making ethanol from FCI rice on govt mandate
--Ethanol body chief: Distillers to lift all FCI rice allocated for 2025-26
--Ethanol body chief: Oil cos' ethanol allocation policy creating disparity
--Ethanol body chief: Ethanol buys from grain-deficit zone ups feed logistics
--Ethanol body chief: Ethanol buys from grain-deficit zone ups diesel use, CO2
--Ethanol body chief: Many distilleries running at 60-70% on weak orders
--Ethanol body chief: Urging govt for roadmap beyond 20% ethanol blending 
--Ethanol body chief: Ethanol exports unviable due to high feedstock costs
--Ethanol body chief: Yet to scale 2G ethanol; export nod makes little sense

 

By Afra Abubacker

 

NEW DELHI – Though India is scaling up the use of maize as a feedstock for ethanol production, the grain's price is likely to remain stable, supported by higher output, C.K. Jain, president, Grain Ethanol Manufacturers Association, said. The assured supply of surplus rice from the Food Corp. of India has reduced dependence on maize and helped ease inflationary pressure in the grain market.

 

"When you withdraw the FCI rice from the feedstock mix, then prices of maize and other grains will go out of control," Jain told Informist in an interview. Though margins for ethanol produced from FCI rice are thin due to lower pricing, and higher transportation and processing costs, it caps the rise in maize prices, he added.

 

In addition, distilleries find an assured supply of FCI rice at fixed rates stablising operational costs, but it requires higher working capital. "Producing ethanol from FCI rice also needs 60–65 days of working capital, compared with 25 days for market-bought grain, so the financing burden is much higher (in case of rice)."

 

Jain also pointed out that oil companies' ethanol procurement policy, aimed at cutting logistics costs, paradoxically raises carbon emissions and transport expenses across the value chain when feedstock is moved from surplus to deficit zones. "OMCs say they want to reduce diesel use by buying ethanol closer to their depots. But they forget that to move one litre of ethanol, you need to move 2.65 kg of grain first. So overall, the transport and emissions go up instead of coming down in the ecosystem", Jain said.

 

In addition, the procurement policy has created regional disparities and idle capacities. When oil companies invited tenders for 10.5 billion litres of ethanol in 2025-26 (Nov-Oct), they received supply offers for 17.7 billion litres, or about 70% more than required. Amid high offers, oil companies introduced certain criteria to optimise ethanol procurement logistically. 

 

While the policy aims to promote local ethanol sourcing, it is being implemented in a way that disadvantages surplus regions, which already have large, operational ethanol units. Due to this ethanol allocation policy, some states such as Gujarat, Assam and Rajasthan received 100% allocations while grain-surplus states, such as Madhya Pradesh, Bihar and Karnataka, received barely 22% of what they offered, Jain said.

 

Jain also discussed the shift in India's ethanol feedstock mix between grain and sugar and the challenges in policy-driven blending mandates. For the 2025-26 (Nov-Oct), oil marketing companies have so far placed supply orders for 10.5 billion litres of ethanol. Of this, only about 28% will come from sugar-based feedstocks, and the remaining 72% has been contracted from grain-based feeds. 

 

Below are the edited excerpts from the interview:

 

Q: Oil marketing companies have placed bulk supply orders for around 4.8 billion litres of maize-based ethanol this year. How much maize would be required to fulfil these supply orders? Do you expect maize prices to firm up as demand rises?

A: To produce 4.8 billion litres of ethanol from maize, around 14 million tonnes to 15 million tonnes of maize would be needed. Last year, the country produced about 38 million tonnes of maize, of which nearly 13 million tonnes-14 million tonnes were used for ethanol production.

 

Maize production is expanding rapidly and is expected to rise by 4 million tonnes–5 million tonnes to about 43–44 million tonnes this year. With such growth, maize remains in a comfortable surplus, so prices should stay stable for all industrial users, including ethanol, starch and poultry feed. Maize has minimal direct consumption as food, so demand from that segment is negligible. Moreover, the government has allocated about 2.3 billion litres of ethanol from the Food Corp. of India's surplus rice, which reduces the load on maize-based feedstock.

 

Q: Are distillers finding maize-based ethanol production lucrative at current feedstock prices? What is the average ethanol yield from one tonne of maize and FCI rice?

A: From 1 tonne of maize with about 12% moisture, distillers typically get around 380 litres of ethanol, 27% of by-product DDGS (Dried Distillers Grains with Solubles), and roughly 450 kilograms of carbon dioxide, which is used in feed and industrial applications. One tonne of FCI rice produces about 450 litres of ethanol, though DDGS output is lower... around 15–16% of the ethanol yield. 

 

Q: FCI rice gives higher ethanol yield but is priced lower around INR 60 a litre, compared with roughly INR 72 a litre for maize-based ethanol. Is that why margins are tighter for rice-based ethanol?

A: Yes, the government provides incentives to encourage maize use for ethanol. Rice ideally should not be diverted to ethanol since it's a staple foodgrain. But India currently has surplus rice. After this paddy procurement season, FCI is expected to have a carry-over stock of about 25 million tonnes after meeting requirements for free grain distribution, the public distribution system, and emergency reserves.
 

Of that surplus, 5.2 million tonnes have been allocated for ethanol. Because of these large carry-over stocks, the government has allocated rice for ethanol production. Margins on rice-based ethanol are thin. The godown price of FCI rice is around INR 2,320 per 100 kg, and by the time it reaches plants after transportation, loading, and processing, it costs around INR 2,475 per 100 kg. That adds INR 2–3 per litre to production costs, leaving thin margins. 

 

(For 2025–26, the government has raised only the procurement price of ethanol made from FCI rice to INR 60.32 per litre from INR 58.50 last year. Maize-based ethanol continues to fetch the highest price of INR 71.86 per litre.)

 

Q: The government has mandated that 40% of grain-based ethanol must come from FCI rice. How do distillers view this compulsion? Is this assured supply of FCI rice at fixed prices helping distilleries, or are government procedures delaying operations?

A: The ethanol blending programme belongs to the government and farmers; we are simply the converters. We comply with the directives. If the government mandates 40% from FCI rice, we follow it.

 

That said, producing ethanol from FCI rice needs more working capital. Around 60–65 days of funding, compared with 25 days for market-purchased feedstocks like maize. This raises financing costs and slows operations. Still, it helps stabilise the prices of other grain feedstocks. If FCI rice were withdrawn as a feedstock, the prices of maize and damaged food grains would go out of control. 

 

Q: Will distillers lift the full 5.2 million tonnes of FCI rice allocated for ethanol production in 2025–26?

A: Yes. Since the allocation came early this year, it should be fully lifted. In 2024–25, the allocation came late, around April. Even then, 3.2 million tonnes were lifted. With an earlier allocation this year (in October), we expect to use the full 5.2 million tonnes. (Similar to 2025-26, the government had allocated 5.2 million tonnes of FCI rice for ethanol production in 2024-25)

 

Q: Distillery capacities have grown faster than oil companies' demand. How serious is the issue of under-utilisation? The first OMC tender was for 10.5 billion litres. What's your expectation for the final procurement volume after subsequent cycles?

A: Very serious. When OMCs invited tenders for 10.54 billion litres, they received offers totalling 17.7 billion litres, about 70% more than required. So, they introduced a zonal allocation formula, but some states received only 18–22% of what they offered. Many units are running at just 60–70?pacity, though ethanol plants need to operate at least 80% to stay viable.

 

We have built capacity anticipating long-term demand growth, but blending is currently capped at 20%. The government needs to set a clear roadmap beyond E20. Total ethanol procurement for the year should be about 12 billion litres. OMCs usually float more tenders, so the remaining volume should be covered through those.

 

Q: Grain Ethanol Manufacturers Association has criticised the OMCs' zone-wise ethanol allocation policy, saying it's causing under-utilisation in surplus-grain states. What should the government have done differently?

A: The government should treat India as one unified market instead of dividing it into "deficit" and "surplus" zones as per its convenience. This year, for the first time, OMCs implemented zonal allocation, which created disparity. (Deficit zones refer to areas that have an ethanol supply relatively lower than what oil companies require, and surplus zones refer to areas that produce more ethanol than is needed locally.)

 

Some states such as Gujarat, Assam, and Rajasthan, received 100% allocations, while grain-surplus states, such as Madhya Pradesh, Bihar, and Karnataka, received barely 22% of what they offered. That anomaly shouldn't have happened. Now that the tender is closed and orders are in place, nothing can be done, but we have asked for corrections in the next cycles.

 

Q: Do you think OMCs have adopted this system mainly to reduce transportation costs? And does Gujarat even have enough grain to justify these allocations?

A: That's the contradiction. OMCs argue they want to cut diesel consumption by cutting transport distances from distilleries to their depots, but they forget that to produce 1 litre of ethanol, you first have to move 2.65 kilograms of grain to the distilleries (in deficit zones). If you consider the entire ecosystem, this is actually causing more emissions, not less.

 

States like Gujarat don't have sufficient grain, so feedstock has to be transported from elsewhere. This reduces local procurement in surplus regions and ultimately affects farmers' incomes there.

 

Q: Can you give us an overview of India's distillery landscape? How many grain-based units exist, and where are they concentrated? What has attracted new entrants into the market?

A: The grain-based ethanol sector began just three years ago. Before 2023-24, the supply share between sugar and grain-based ethanol was more or less equal, but since then, the grain segment has expanded to nearly 70% of the total ethanol supply.

 

Grain Ethanol Manufacturers Association has roughly 150 members and there are about 225 grain-based distilleries nationwide with a combined capacity exceeding 10 billion litres. Most are in grain-producing states such as Madhya Pradesh, Karnataka, Bihar, and Uttar Pradesh, where feedstock is easily available. Government discussions about increasing ethanol blending to 30% in petrol and even introducing isobutanol blends in diesel attracted investments and capacity expansions.

 

Q: The sugarcane-based distilleries have also raised concerns about underutilisation. Do you think oil marketing companies should have allocated 40–50% of supply orders to sugar and grain-based feedstocks?

A: When you look at the numbers, both sectors have received allocations in roughly the same proportion to their offers. Sugar-based distilleries offered about 4.7 billion litres and received around 2.8 billion litres, which is about 60?ceptance. Grain-based distilleries offered about 13 billion litres and got 7.5 billion-8.0 billion litres, or about 58%. So, in percentage terms of orders against offers, both feedstocks are comparable. The real disparity is within regions, some plants received full allocations, while others got only 20–25%.

 

Q: The sugar industry says that of the total 10.5 billion litres of ethanol required, they were allotted only 2.8 billion litres.

A: That's correct when you look at it in terms of total ethanol supply allocation, but proportionally, it's fair. Last year, grain-based ethanol accounted for around 70% of total supplies, and the same is true this year. In 2023–24, the supply share was about 40–50?tween sugar and grain, but the grain segment has grown rapidly. It is a three-year-old industry that's expanding capacity faster than demand growth.

 

Q: Should there be a more balanced approach across feedstocks? Isn't there a supply risk if ethanol production becomes too dependent on grains?

A: The government has designed the policy intelligently. There are six feedstocks in total. Three from sugar (cane juice, B-heavy molasses, and C-heavy molasses) and three from grain (maize, damaged foodgrains, and FCI rice). This ensures a diversified feedstock basket. Sugar mills have the advantage of producing both sugar and ethanol and even export sugar. Grain distilleries, however, have only one product, ethanol.

 

Q: But grain-based distilleries also have by-products like DDGS, right?

A: Yes, DDGS or Dried Distillers Grains with Solubles is a valuable by-product used in animal feed, especially poultry. It helps offset some costs and contributes to feed security by reducing dependence on imported feed ingredients.

 

Q: In your view, what should guide the government when deciding feedstock allocations? Should it be availability, sustainability, or profitability?

A: Profitability shouldn't be the main factor. The ethanol programme is rooted in rural development and farmer welfare. A lot of the ethanol value chain's revenue goes to farmers through feedstock purchases. The government's priority is to enhance farm incomes while maintaining price stability. The industry has also become more efficient and transparent in costing. Policy decisions should ensure both farmer benefits and industry viability.

 

Q: Given high investments and the issue of capacity underutilisation, how is the industry trying to de-risk itself from policy or pricing shocks? What are the key challenges to raising ethanol blending beyond 20%?

A: We have urged the government to expand the blending target beyond 20% and promote flexible-fuel vehicles. Once flex-fuel cars enter the market, ethanol consumption will rise sharply. Once demand expands, utilisation will improve, and the industry will stabilise financially. Awareness and infrastructure remain key challenges for higher blends. Negative narratives run faster than positive ones.

 

Q: In the meantime, are ethanol exports a viable option for India? The government recently allowed free exports of 2G ethanol. Are any grain distilleries producing second-generation ethanol?

A: No, exports are not viable currently. Our feedstock costs are much higher than those in countries like the US or Brazil. Also, they use genetically modified varieties, which give higher yields. That cost gap makes Indian ethanol uncompetitive internationally. Until domestic feedstock costs come down or global prices rise, export won't be feasible. None of our member distilleries produces 2G ethanol. There's practically no commercial-scale production in India at present, so allowing 2G ethanol exports doesn't make much practical sense. End

 

Edited by Deepshikha Bhardwaj

 

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