MUMBAI, Nov 4 — India's drive to replace imported oil with home-grown biofuel faces a setback as the lowest monsoon rainfall in more than a decade hits corn and sugarcane crops, forcing New Delhi to prioritise food security over ethanol production, Reuters reported on November 4. The proportion of ethanol in Indian petrol is poised to fall below the official 20% target in the supply year that began this month, industry insiders told Reuters, reversing gains made after the government achieved the milestone some five years ahead of schedule.

Source: Reuters

A severe El Niño this year cut India's monsoon rainfall by nearly 13% from normal levels, and concerns about crop shortages sent corn and sugar prices soaring some 40% to hit record highs, while rice — another ethanol feedstock — climbed 20%, Reuters reported. Retail food inflation accelerated to 7.74% in September from 5.97% a month earlier. The scarcity of feedstocks could push India's ethanol blending rate down to around 15% in the current supply year from the previous period's 20%, G.K. Sood, chairman of agribusiness company KN Agri Resources, told Reuters. 'India is the world's most populous country, so food has to take priority over fuel, more so in a drought year,' he said.

Source: Reuters

The government last month signalled the shift in priorities by directing oil companies not to procure any ethanol made from sugar-based feedstocks for the new supply season, and it cut the purchase price of corn-based ethanol to Rs 68.86 per litre from Rs 71.86 the same month, squeezing distillery margins, Reuters reported. Lower blending would squeeze producers who borrowed heavily to expand capacity to about 20 billion litres a year in anticipation of rising ethanol demand, resulting in significant overcapacity, the report said. Corn production is likely to fall by as much as 15% from this year's record of 55 million metric tons, according to industry estimates cited by Reuters, and ethanol producers have increasingly turned to damaged grains, raising worries about animal feed availability, C.K. Jain, president of the Grain Ethanol Manufacturers Association, told Reuters.

Source: Reuters

The stakes are large: the E20 initiative has saved nearly Rs 2 trillion ($21.1 billion) in oil import costs since 2014, according to government data cited by Reuters, with annual savings estimated at Rs 430 billion at the 20% blending rate, so a sustained drop would leave India more reliant on overseas crude. India's ample rice stockpiles offer an alternative feedstock, but an expensive one — the government sells the grain to ethanol producers at roughly half the price it pays to buy and store it, Reuters noted. A government spokesperson did not respond to a Reuters request for comment, and no official revised blending figure has been announced; the 15–17% range is an industry expectation reported by Reuters, not a government decision. Sources: Reuters (November 4, 2026).

Source: Reuters