India-US Trade Turns a Corn-er: Implications for India’s Ethanol Policy

Ethanol blending has been in the news in recent weeks, amid debates over vehicle compatibility, the push for sustainable fuels at COP30, and the ongoing US–India trade negotiations. Reports suggest that the trade negotiations have yielded a critical consensus: India will allow maize (corn) imports from the US specifically for ethanol production. While the final deal is still being ironed out, this potential allowance signifies a strategically astute move by India. If implemented with careful regulation (to protect domestic farmers), this policy could effectively navigate the core trade-off between the ethanol programme’s demand for feedstock and the imperative to control food price inflation.

The ethanol blending programme began in the early 2000s as a way to manage recurring sugar surpluses but truly gained momentum after the National Policy on Biofuels (2018), which streamlined incentives, expanded feedstock options, and positioned ethanol within a broader energy security and climate strategy.

Using sugarcane molasses and surplus sugar has strengthened the financial health of sugar mills and farmers. However, as blending targets rose, sugarcane alone became insufficient, prompting a shift toward food grains such as maize and rice, as outlined in the Niti Aayog’s report “Roadmap for Ethanol Blending 2020-25”. Strong policy support, including interest subventions, has rapidly expanded distillery capacity, especially grain-based ones, reflecting this gradual move away from sugarcane dependence.

India has achieved its ambitious 20% ethanol blending target (E20) ahead of schedule, marking a major policy success, though it has brought some unintended cascading effects. The demand for maize in the country has exceeded domestic supply this year, and India has become a net importer of the crop for the first time in several years. The resulting increase in prices has burdened other major users, such as the poultry sector, and prompted shifts in cropping patterns. The silver lining, if you really want to see it, is that grain-based ethanol has helped diversify production beyond the sugarcane belt states.

The current year’s fuel demand is around 1,000 crore litres of ethanol as estimated in the Niti Aayog report, which is expected to increase to around 1,500 crore litres by 2030 if the 20% mandate were to continue. Increasing the blending target or promoting more flexible fuel vehicles would increase the demand further. But to simplify the calculations here, we will assume the bare minimum demand to be a continuation of the E20 mandate. In addition to fuel, there is also an industrial demand for ethanol, which when included brings the total ethanol demand in 2030 to around 2,000 crore litres.

This means that in the next five years, India needs to almost double its ethanol production. The area under sugarcane cultivation is unlikely to increase significantly, given water, land, and policy constraints. The onus of meeting more than half of the additional ethanol demand will thus fall on maize. India’s current annual maize production is 41–42 million tonnes (Mt), of which about 12 million tonnes is used for ethanol production. By 2030, this would have to rise to 68–76 million tonnes (depending on feed alternatives for livestock), with 27 million tonnes going towards ethanol. Unless there is an unprecedented jump in maize yields, this will require an additional 4–8 million hectares of land to be brought under maize cultivation, mostly in the rabi season for better yields.

Based on our analysis, considering minimum support prices and current cropping patterns, this maize expansion is likely to come at the cost of oilseed and pulse production, causing a policy incoherence: energy independence through ethanol versus food independence through reduced imports of edible oils and pulses.

If India aims to maintain even E20, it will inevitably face some degree of import dependence unless there is a breakthrough in emerging technologies such as second or third-generation ethanol. Producing substantially higher volumes of crop-based ethanol domestically could have serious groundwater, land-use, and food security implications.

Given India’s policy against genetically modified (GMO) crops for human consumption, it makes sense to allow a limited quantity of GMO maize imports from the US specifically for fuel-grade ethanol production. This could be implemented through a tariff-rate quota system, where a fixed volume of maize (up to a few million tonnes annually, perhaps) can be imported at a lower tariff, while higher duties apply beyond that threshold. In the ongoing India–US trade deal negotiations, this can be used as leverage to catalyse a favourable reduction in other tariffs on Indian imports. Such a strategy would ensure that our distilleries remain viable, blending targets are met, and domestic farmers are protected from being undercut by cheap imports.

This approach may seem to go against India’s self-sufficiency and farmer-first narratives; however, sustaining E20 while maintaining food security will anyway require external support, whether through direct ethanol (or grain) imports or imports of other commodities such as edible oils and pulses. True energy independence isn’t isolation; it’s smart engagement. This pragmatic step safeguards food security, preventing unsustainable stress on India’s agriculture system.

Authors: Ramya Natarajan and Kaveri Ashok are research scientists at the Center for Study of Science, Technology and Policy, a research-based think tank.

Tags: ethanol, demand, corn, US, Production, India, imports