MIND THE TRADE-OFF

In times of climate change, a careful roadmap must be drawn to plan how much of food crops can be diverted to fuel production

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SINCE THE start of the ethanol-blending programme, raw material availability has been a constant constraint. This has led to a series of knee jerk policy shifts, creating disruptions in agricultural markets and uncertainty among farmers and ethanol distilleries.

India allows production of ethanol from three food crops—rice, sugarcane and maize. Distilleries procure these feedstocks from different sources: surplus rice from Food Corporation of India (FCI), and broken and damaged rice from open market; sugarcane from the sugar industry; and maize from both open market and supplies from the National Agricultural Cooperative Marketing Federation (NAFED). But this does not mean a steady supply for distilleries.

Take the case of rice. In September 2022, the government imposed restrictions on the export of broken rice, except basmati. The ban came amid concerns of poor rice yield due to below-normal monsoon rains during the kharif season. However, industry insiders tell DTE that the real reason was the diversion of rice towards ethanol production. According to data provided by Union Ministry of Consumer Affairs, Food and Public Distribution, the allocation of FCI rice for ethanol drastically increased in 2021-22 to 1.38 million tonnes, compared to 0.08 million tonnes in 2020-21. Analysis of media reports suggest that once the government realised that the rice production was low, it placed restrictions on its exports, affecting India’s trade and export market. Then in July 2023, FCI abruptly stopped selling rice to ethanol plants, fearing food insecurity. This led to grain-based distilleries incurring losses.