← External Forces: Climate & Resource (all topics)
Ethanol blending programme
What it is
The national programme to blend ethanol into petrol, which reached the 20% target in 2025, ahead of the original 2030 schedule. Ethanol is made from sugarcane juice, molasses, damaged grain and maize, and is bought by oil marketing companies at administered prices
It links three previously separate sectors - sugar, grain and refining - into one policy supply chain
Impact on industries
- Gives sugar mills and distillers a second revenue stream with assured offtake, insulated from global sugar price crashes
- Cuts crude import dependence and has created a large, policy-backed distillery capex cycle
- Maize diversion to ethanol has raised feed and starch costs structurally, so the benefit to one sector is a cost to others
- Procurement prices are administered, so the entire economics depend on a periodic government decision rather than a market
- Higher blending targets beyond 20% require engine compatibility and feedstock that does not compete with food, which is what second-generation ethanol is meant to solve