Union Road Transport and Highways Minister Nitin Gadkari’s renewed push for 100 percent ethanol blending foregrounds a critical policy dilemma: how far can India pursue energy self-reliance without unsettling its food economy? The urgency is evident. India meets about 80 percent of its crude oil demand through imports, at an annual cost of roughly 150 billion dollars, leaving both the economy and diplomacy exposed—as crude prices hover near $100 a barrel amid the West Asia crisis. Under the current 20 percent blending mandate, the country is estimated to have saved over Rs 1.5 lakh crore in foreign exchange. Scaling this to 100 percent, however, is far from straightforward.
The auto industry must align with the government’s flex-fuel policy, while the government must prepare the ground for E100 adoption. Resistance persists, as manufacturers would need to upgrade engines for compatibility. Concerns over fuel corrosiveness and lower mileage—though disputed—have unsettled consumers. The government must therefore persuade both industry and users. But the real test of an aggressive blending target lies beyond engines—in the incentives it creates for agriculture. The Economic Survey 2025–26 has warned that expanded blending could distort cropping patterns, increase food price volatility and worsen long-term nutritional security. Farmers are already responding to these signals. While sugarcane remains dominant, maize is emerging as a key feedstock. Between FY22 and FY25, maize-based ethanol prices rose 11.7 percent annually, while acreage expanded by about 7 percent, often at the expense of oilseeds and pulses.
Policy choices are reinforcing this shift. The allocation of about 5.2 million tonnes of rice from FCI stocks for ethanol in 2024-25—up sharply from under 3,000 tonnes earlier—marks a decisive turn toward foodgrain-based fuel. An ethanol-driven 'corn rush' is nudging farmers away from soybeans and pulses, tightening domestic supplies. This raises dependence on edible oil imports, with implications for foreign exchange. Maize diversion also strains the poultry sector, where it's a key feed component, pushing up prices and necessitating imports to stabilise markets. Using foodgrains for fuel rather than the PDS raises difficult questions in a country still grappling with malnutrition. India must avoid creating incentives that undermine food security. Adopting market-linked ethanol pricing, as in Brazil—the only country with 100 percent blending—could help avoid policy bias toward cash crops. A calibrated approach, alongside a shift toward second-generation ethanol from waste and parallel investment in EVs, would better balance energy goals with economic and nutritional stability.