Corn could lose part of India’s bioethanol market amid competition from rice

Bioethanol producers in India are concerned about a potential decline in demand for corn following new government fuel procurement terms for the 2026/27 season. A tender announced by oil marketing companies sets different procurement prices depending on the feedstock, potentially intensifying competition between corn and rice. In particular, the price of corn-based ethanol has been set at INR 66/litre, with an additional premium of INR 2.79/litre, while ethanol from damaged foodgrains is priced at INR 64/litre and ethanol from surplus foodgrain stocks at INR 60.32/litre.

Market participants are particularly concerned about a possible sharp increase in purchases of ethanol produced from damaged foodgrains. According to industry estimates, this category accounted for around 600 mln litres in the 2025/26 season, while volumes could exceed 7 bln litres in 2026/27. Meanwhile, the tender sets a procurement cap of 1.08 bln litres for ethanol produced from surplus foodgrain stocks during the first three quarters of the season.

The Grain Ethanol Manufacturers Association (GEMA) warns that the new contract allocation mechanism could weaken corn’s position as an industrial feedstock. In particular, if procurement gives priority to the lowest-priced products, corn-based ethanol producers could receive smaller order volumes. GEMA President C.K. Jain called for a review of pricing and procurement allocations across different grain feedstocks to ensure balanced development of the industry.

At the same time, the new tender introduces restrictions on procurement of ethanol produced from sugarcane juice, sugar syrup and B-heavy molasses. However, ethanol from C-heavy molasses remains eligible for government procurement. The Indian Sugar & Bio-Energy Manufacturers Association (ISMA) welcomed this approach, as it allows more raw material to be preserved for sugar production amid uncertainty over the upcoming harvest. However, sugar industry representatives expressed concerns about preferential contract allocations to dedicated ethanol plants holding long-term offtake agreements.

Thus, the new procurement terms could change the feedstock mix used in India’s bioethanol production. An increasing share of ethanol made from rice and other alternative grain feedstocks could limit the growth potential of industrial demand for corn. However, the actual impact on the grain market will depend on the final allocation of contracts among producers and procurement volumes for individual feedstock categories. For now, these are potential changes in demand patterns rather than a confirmed reduction in corn use.

Tags: biofuel, bioethanol, corn, India