India's Maize Ethanol Surge Saves Foreign Exchange but Squeezes Food and Water

India has saved over Rs 1.4 lakh crore in foreign exchange through its ethanol blending programme, but the rapid shift to maize-based production — which now contributes an estimated 48-51 percent of approximately 1,039 crore litres of ethanol in the latest supply year — is creating new food, nutrition and water pressures that require urgent course correction. Grain-based routes now supply about 69 percent of total ethanol, up sharply from sugarcane-based routes.

India's Ethanol Blended Petrol programme has been one of the government's flagship clean fuel initiatives, scaled rapidly over the past five years. However, the diversification away from sugarcane ethanol to grain-based production has concentrated heavily on maize, which now accounts for nearly half of total ethanol supply. Maize output has grown at nearly 9 percent annually between FY 2022 and FY 2025, driven primarily by distillery procurement rather than food or feed demand. This has distorted maize markets and created upstream effects on poultry and livestock feed costs.

The water implications are significant. Maize cultivation in many Indian growing zones relies on irrigation, with water requirements substantially higher than those of rain-fed sugarcane in established producing regions. Expanding maize cultivation into water-stressed agro-climatic zones to meet distillery demand is placing new pressure on already depleted aquifers. Simultaneously, the diversion of grain to fuel — rather than food or animal feed — has nutritional implications in a country where food security at the household level remains a live policy concern.

Policy analysts are calling for a reorientation of the ethanol programme that reinstates agricultural feedstock diversity, contains maize's share within sustainable limits and revisits the relative pricing signals that have made grain-based ethanol commercially dominant. Second-generation ethanol from cellulosic and waste feedstocks — which would use agricultural residue rather than food grain — offers a longer-term pathway but requires technology scale-up. The case demonstrates how quickly biofuel policy can reshape agricultural markets and why food-fuel trade-offs require systematic monitoring and governance.

Key figure — Rs 1.4 lakh crore in foreign exchange savings from ethanol blending