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

Second, sugar production in 2025-26 fell short of expectations. The initial estimate was around 34.3 MT, but the government has now revised it to 30.6 MT, citing damage from red rot and top borer. About 27.35 MT of sugar had been produced by June, implying that another 3.25 MT would have to be produced during July-September to reach the revised estimate. Yet the production in these three months averaged only around 0.38 MMT over the previous six seasons. We expect a further downward revision of sugar production — between 28 and 29 MT.

Third, the ethanol programme diverted about 2.75 MT of sugar even when supplies were tight. The more important issue is that ethanol blending has progressed much faster than feedstock supplies. Ethanol blending remained largely stagnant for years, reaching only 1.53 per cent in 2013-14, before accelerating to around 5 per cent by 2019-20 and ultimately 20 per cent in 2025-26. The feedstock supplies could not keep pace with the blending programme. No wonder energy policy started competing with food markets.

The timing is particularly difficult. The festive season is approaching, when sugar demand typically rises, while fresh cane supplies will not arrive in significant quantities until mid-October. The market must, therefore, rely on existing stocks for many more weeks. Thin inventories are pushing up sugar prices, which could go even higher if timely action is not taken.

In a more open economy, a production shortfall would normally be corrected through price signals triggering imports and changes in consumption. But India’s sugar sector remains heavily regulated: Sugarcane pricing, sugar sales, imports, exports and ethanol feedstock allocation are decided by the government. When the government controls every step of the sugar/ethanol value chain, the resulting spike in sugar prices also has to be owned by the government. It is a classic case of policy failure.

The government’s response so far has been to allow 1 MT of duty-free raw sugar imports. We feel this is too little, too late. Our calculations suggest that the government needs to import at least 3-4 MT of refined sugar and increase supplies in the open market before and during the festive season. The import duty on refined sugar (100 per cent) must be slashed to zero or just 5 per cent.

The second response should be to temporarily alter the ethanol feedstock mix. Sugar-based ethanol should be drastically reduced, with greater use of alternative feedstocks. FCI is overflowing with rice stocks far in excess of buffer norms. The government can allocate more from those stocks and minimise the use of sugar for ethanol. But FCI must charge at least the procurement price of rice from ethanol plants, if not its full economic cost.

However, maize is the best option as a feedstock for ethanol. It doesn’t guzzle as much water as rice or sugarcane. The government is already using maize as a primary feedstock for ethanol. Although maize production has been increasing over the last decade or so, our productivity levels hover around 3.5 tonnes/ha — way below the US’s 11 tonnes/ha. Further use of maize for ethanol without a commensurate increase in production will put pressure on maize prices and, consequently, on poultry meat, eggs, and milk, where it has been the main feed. Thus, shifting from sugar to rice or maize does not eliminate the food-fuel trade-off. The only way is to generate large surpluses of maize by raising its productivity. Would India allow GM maize, which drives US yields?

The third response could be either to directly import ethanol, when domestic supplies are putting pressure on food prices, or reduce the blending from 20 per cent to about 15 per cent.

The deeper lesson is that India’s ethanol programme needs a little rethink and recalibration. We need to know the net energy balance with different feedstocks. Rather than rigidly allocating the amount of ethanol from sugar, rice or maize, oil marketing companies could be given flexibility to choose the most economical source, subject to safeguards for food security, farmers and the environment. The government should focus on strategic buffers and food-security safeguards rather than managing every feedstock allocation.

The immediate response is clear: Bring in enough sugar to rebuild the stock cushion, temporarily shift ethanol away from sugar, use FCI grain only when genuine surplus exists, and retain imported ethanol as a safety valve. Maize-based ethanol would save water and would be more benign to the environment. But we need to invest more in raising its productivity. India’s ethanol programme has made major strides, and going from 5 per cent blending in 2019-20 to 20 per cent in 2025-26 is putting huge demand on its feedstocks. Overall, we feel that fuel self-reliance should never force a choice between food and fuel. Atmanirbharta in fuel must strengthen, not undermine, India’s food security; food must remain the higher-order priority.

We hope the Modi government can undertake a 360-degree evaluation of its ethanol programme and recalibrate the policy design so that it does not push up food prices.

Gulati is distinguished professor and Adhikari a research assistant at ICRIER. Views are personal