Every litre of petrol sold in India today is no longer only petrol. About 20% of it is ethanol, a form of alcohol made by fermenting sugar or starch. A fuel that is 20% ethanol is called E20. Since 2025, E20 is what comes out of the petrol pump almost everywhere. The share is set to rise to 30% by 2030.

The government gives two reasons. One, India buys most of its oil abroad, and so every litre made at home need not be imported. Two, ethanol comes from plants, which take in carbon dioxide as they grow. But the issue is different. Ethanol has to be made from something, and the question is what, and at whose cost.

Where is the Ministry of Agriculture?

The ethanol policy of the government decides what farmers grow, what farmers earn, and how much of the country’s foodgrain remains affordable for the poor. But this ethanol policy is made by the Ministries of Petroleum and of Road Transport. The Ministry of Agriculture is not a party to it.

This is a bizarre situation. A programme that has changed the crop grown on millions of hectares in a few years is run by two departments carrying no responsibility for what is grown, for the water it takes, or for what the farmer is paid. Nobody has assessed what safeguards agriculture needs before a change of this size, or what happens to cropping patterns, to groundwater, to the country’s targets for the production of pulses and edible oils, or to farm incomes. There is no white paper, and Parliament has received no reporting yet.

The reason offered for the hurry is the conflict involving Iran, and the claim that more ethanol will ease its adverse effects. Urgency of that kind closes the conversation instead of having an open debate. Another reason offered is the loans that banks have already lent to build the ethanol factories. But why did the government encourage banks to lend thousands of crores to ethanol plants before there was any consensus on the policy?

What is Ethanol?

The raw material used to make ethanol is called the feedstock, and India’s feedstock is almost entirely food crops. Sugarcane came first, but grain now dominates. Maize is the largest single source. Rice comes next, drawn from the stocks of the Food Corporation of India (FCI). The change in the cropping pattern in recent years has been rapid. Between 2022-23 and 2025-26, the area under maize rose from 10.74 million hectares to 14.41 million hectares. Where did this new land come from? It came from somewhere: broadly, soyabean area fell, and pulses area and output fell.

What would be India’s requirement of pulses and oilseeds in the near future? In February 2024, a NITI Aayog working group projected food demand and supply to 2047-48. It found that domestic production will be sufficient for most commodities, with two exceptions: pulses, with a supply of 47 million tons against a demand of 49 to 57 million tons; and edible oils, with a supply of 24 million tons against a demand of 31 to 33 million tons. At the same time, maize demand was projected to rise to between 86 and 109 million tons due to the higher demand for biofuel. This paper said that India must allocate more area to maize. Six months later, NITI Aayog published a strategy for closing the gap in edible oil production. The primary strategy advocated was the shift of land from cereals including maize to oilseeds.

How can maize and pulses/oilseeds be cultivated on the same land? Neither paper explains how the choice between crops is to be made. In practice, the choice is now dictated by the ethanol programme.

Where is the Rice going?

The rice used for ethanol is a different matter. On the same projections, rice production is projected to reach 154 million tons by 2047-48 as against a demand of 113 to 114 million tons. Turning part of the surplus rice production into fuel harms nobody.

The problem lies elsewhere. In a written reply to the Rajya Sabha in July 2026, the government said that the FCI supplied 6.35 million tons of rice to ethanol factories between June 2025 and June 2026 and received ₹14,596.78 crore in return. The rice was sold at ₹2,250 per quintal until October 2025 and ₹2,320 per quintal after that. One quintal is 100 kilograms. The FCI’s average cost of buying and holding rice was ₹3,719.72 per quintal in 2024-25 and ₹3,889.46 per quintal in 2025-26. In other words, grain that cost the public exchequer around ₹24,700 crore was sold for just ₹14,597 crore. The difference of about ₹ 10,000 crore in one year is an outright transfer of public money to private companies.

Who will Gain and who will Lose?

Let us first consider the ethanol factory owners. India has close to 500 ethanol plants, that sell to public sector oil companies at a price fixed by the government. For maize ethanol, the sale price is a base price of ₹66.07 per litre plus an incentive of ₹5.79: total ₹71.86 per litre. These sales are under long-term agreements, often backed by a bank guarantee. Since 2018, the government has paid part of the interest rate on their loans across more than 1,200 projects. In short, the price is fixed, the buyer is certain, and almost all the risk is borne by the public banks.

Come to the maize farmer. The government claims that ₹1.66 lakh crore has gone directly to farmers. But between March 2025 and August 2026, the average market price of maize did not reach its minimum support price (MSP) even once. In November 2025, the MSP was ₹2,400 per quintal but the farmers in many States received only between ₹1,650 and ₹1900 per quintal. This is because maize has no credible procurement mechanism as for rice and wheat. In most mandis, the maize farmer sells to a private trader at whatever the trader offers.

In short, there are two government prices in the maize sector. The price of ethanol made from maize is enforced by an obligation on the public oil companies to buy it. But the price of maize for the farmer is enforced by nobody. The two prices are totally delinked. When a policy guarantees one price and merely announces the other, it is not difficult to say who the real beneficiary is. In November 2024, a paper of the National Academy of Agricultural Sciences (NAAS) had demanded an assured and remunerative market for maize before asking farmers to shift to maize cultivation. It was never implemented.

Now come to the motorist who buys E20. A litre of ethanol carries about 66% of the energy of a litre of petrol. So, a vehicle running on E20 travels a shorter distance on the same tankful. Manufacturers put the loss at 2% to 4% for engines built for the fuel and higher for older vehicles. Thus, E20 means lower fuel-efficiency and potentially higher maintenance and wear-and-tear costs. It thus imposes a high cost on millions of small and independent vehicle owners in the last-mile and light freight/cargo sectors. The automobile industry has also been uneasy about the speed of the change and the lack of consultation with it.

Finally, consider the livestock farmers. Maize is an important part of poultry and cattle feed in India. The cost of feed accounts for about 60%-70% of the cost of an egg, a kg of chicken, or a litre of milk. It is this maize that is diverted into fuel. Over the years, the shortage of maize has led to a sharp rise in the price of poultry and cattle feed. This has pushed livestock farmers into distress. In response, the government allowed the duty-concessional import of 5 lakh tons of distillers’ grain from the United States. So, in all probability, what was fed to India’s poultry and cattle was the leftover of the corn-ethanol industry in the United States. Yet, poultry and cattle feed prices in India are rising sharply.

What do we Demand?

The key problem today is the completely asymmetric treatment of the ethanol industry and the farmers by the government. The government has gifted windfall gains to the ethanol industry at the cost of the farmer. The ethanol industry has the fixed price, a guaranteed buyer, and access to subsidised loans. But the farmer has none of this.

We are not opposed to ethanol. We are opposed to an ethanol policy that enriches the distilleries and squeezes the farmer. That is why we are demanding four urgent measures.

One, the Ministry of Agriculture should be a party to a policy that will remake Indian agriculture.

Two, the government should publish a full account of the land, water and emissions along the whole chain, and of the cost to fuel efficiency, before going ahead with the policy.

Three, the government should give the maize farmer a price as certain as the ethanol factory’s, with an agency like FCI ensuring procurement.

Four, when the value of a public grain stock passes to a private plant, the government must transparently reveal what the value of that transfer is and who received it.

Our demand is to establish who gains, who loses, and what the change will cost Indian agriculture, farmers and consumers. Only after this must the government go ahead with the ethanol policy. Self-reliance was the promise. We are asking whose self-reliance has the government protected.