India’s ethanol policy is entering a more difficult phase: the government’s decision to stop sugarcane juice, sugar syrup and B-heavy molasses from being used for ethanol procurement in the 2026-27 supply year is shifting more demand towards maize just as feed and industrial users are already competing for the crop. The consequence is not limited to fuel. It reaches poultry farms, dairy producers, starch manufacturers and consumers who depend on eggs, milk and chicken.
The immediate trigger is the government’s concern over domestic sugar availability. On October 16, oil marketing companies were directed to reduce sugar diversion for ethanol production to zero. On the same day, Bharat Petroleum Corporation Ltd issued a tender seeking bids for about 11 billion litres of ethanol for the November 2026-October 2027 Ethanol Supply Year. The two decisions have created a structural mismatch between the feedstocks that remain eligible and the volume that the fuel programme is seeking.
The policy change does not eliminate sugar-derived ethanol altogether. C-heavy molasses, the lower-sugar by-product left after sugar extraction, remains eligible. But the available quantities are not expected to compensate for the loss of sugarcane juice and B-heavy molasses. B-heavy molasses contains more sucrose, while C-heavy molasses contains considerably less. That difference matters because the same volume of ethanol requires more feedstock when the feedstock has a lower sugar content.
The resulting pressure is likely to fall most heavily on maize. Industry estimates cited in the report suggest that ethanol production could require about 16 million tonnes of maize in the next supply year, compared with roughly 13 million tonnes in the current year. At a conversion rate of 380 litres of ethanol per tonne, a projected shortfall of about 6 billion litres would require approximately 16 million tonnes of maize.
This additional requirement would arrive in a market already serving several large users. Maize accounts for more than 55% of poultry feed, and around 60% of domestic maize consumption is estimated to go towards poultry. The poultry sector alone expects maize demand for feed to reach 21.26 million tonnes in 2026 and exceed 22 million tonnes in 2027. The starch industry uses about 6.5 million tonnes annually, while dairy-feed demand accounts for another 5-6 million tonnes, according to industry estimates cited by Hindustan Times.
Overall maize demand across feed, ethanol, starch and other uses could rise to about 55.7 million tonnes in 2027 from an estimated 49-50 million tonnes in 2026. The scale of that increase is important because it brings fuel policy into direct competition with food and livestock production. Ethanol distilleries and poultry-feed manufacturers are not seeking the same product for interchangeable purposes; they are competing for a crop that is central to their respective operations.
The supply side is also uncertain. The report cites estimates that maize production could be 15% lower than the 55 million tonnes produced last year, or about 8 million tonnes lower. Poor rainfall and the possible impact of El Nino are identified as factors that could tighten supplies. These estimates are not a confirmed national production outcome, but they show how quickly the policy’s additional demand could collide with a weaker harvest.
Market prices already reflect some of that concern. Maize prices in key mandis were reported at ₹26-28 per kg, above the minimum support price of ₹24.1 per kg. Industry representatives have reported prices of ₹30-31 per kg in some markets, depending on location, freight and other costs. The gap between the support price and actual mandi prices indicates that the market is responding to demand and supply conditions before the full effect of the next supply year is known.
For poultry, the exposure is unusually high because feed accounts for an estimated 65-70% of production costs. A sustained increase in maize prices can therefore reduce farmers’ margins or be passed through to the prices of eggs and chicken. Deepak Pareek, founder of agri consulting firm HnbY, said the poultry industry faces a genuine survival risk unless maize or ethanol imports bridge the gap for the E20 programme. His assessment links the fuel policy directly to the viability of a major livestock and food-supply chain.
Ricky Thaper, joint secretary of the Poultry Federation of India, said the market could face a prolonged period of tight supply and elevated prices if crop losses occur in key maize-producing states. The poultry industry’s request is not simply for lower prices. Associations have asked the government to consider allocating about 5 million tonnes of broken rice and suitable damaged foodgrains from Food Corporation of India stocks to poultry producers at an affordable rate, subject to quality and food-safety standards.
That proposal places the Food Corporation of India at the centre of the feedstock debate. The government has capped the use of surplus FCI rice for ethanol at 7.2 million tonnes. At an assumed conversion rate of 450 litres of ethanol per tonne, this would produce about 3.25 billion litres of ethanol. Damaged foodgrains could add another source, but agricultural markets expert GK Sood estimates that their contribution could rise from about 700 million litres in the current supply year to a maximum of 1.25 billion litres in 2026-27, depending on availability.
C-heavy molasses can add to the supply, but its contribution is also limited. Sood estimates that production from C-heavy molasses could rise from about 2.2 billion litres in the current supply year to around 2.6 billion litres in 2026-27. However, C-heavy molasses is also used by the alcohol and other industries. Only about 0.5 billion litres may be available to oil marketing companies, compared with 0.17 billion litres used in 2025-26. The result is a projected gap of around 6 billion litres against the BPCL tender.
The prices offered by oil marketing companies show how the policy is attempting to balance different feedstocks. For the 2026-27 supply year, OMCs will pay ₹57.97 per litre for ethanol sourced from C-heavy molasses, ₹64 per litre for ethanol from damaged foodgrains, ₹60.32 per litre for ethanol from surplus FCI rice and ₹66.07 per litre for maize-based ethanol. These prices may influence producer choices, but they do not remove the physical constraint: the required grain must still be available in sufficient quantities.
This is the central institutional issue in the E20 programme. The programme was designed to reduce India’s dependence on imported crude oil and increase the use of domestic feedstocks. Its success therefore depends not only on blending targets or procurement prices, but also on how the policy distributes scarce agricultural resources between fuel, food and industrial users.
The move away from sugar-based ethanol reflects one policy priority: protecting domestic sugar availability. But it transfers pressure to another agricultural commodity. In doing so, it exposes the dependence of the fuel programme on feedstocks that also support food production and rural industries. The question is not whether one feedstock is cheaper or more available in isolation. It is whether the overall system can absorb the demand created when several sectors expand their use of the same crop at the same time.
The FCI’s stocks provide some room for intervention. The corporation held about 84.38 million tonnes of foodgrains on October 1, 2026, comprising 38.10 million tonnes of rice and 46.28 million tonnes of wheat, against a prescribed buffer norm of 30.77 million tonnes. Poultry associations argue that the surplus could be used to reduce pressure on maize while also easing storage requirements. Any such allocation would still have to meet quality and food-safety standards, and the report does not establish that the government has approved the request.
Rice and damaged foodgrains, however, cannot automatically replace maize for every user. The government’s ethanol allocation already assigns a substantial quantity of surplus rice to fuel production, while damaged grain availability is conditional. In poultry feed, maize remains a major ingredient and is difficult to replace entirely, according to industry representatives. This limits the extent to which a foodgrain diversion can solve the feed sector’s problem without creating another allocation choice.
The policy also raises a question about the resilience of the E20 programme itself. The report notes that the programme has faced criticism over vehicle life and fuel efficiency because most vehicles are not E20 compliant. The new feedstock constraints add a separate concern: even if blending infrastructure and vehicle compatibility are addressed, the programme must secure enough ethanol without creating destabilising pressure on food and livestock markets.
What the available evidence confirms is a narrowing supply base for the next ethanol supply year. Sugarcane juice and B-heavy molasses have been removed from the procurement pathway, while rice, damaged foodgrains and C-heavy molasses appear insufficient to meet the volume sought by oil marketing companies. The difference is likely to be made up partly through maize, increasing competition with poultry, dairy and starch users.
What remains uncertain is the final size of the maize harvest, the volume that will actually be procured for ethanol, the availability of imports and the government’s response to demands from feed users. The next important signals will be the outcome of the 11-billion-litre tender, maize production and price data, decisions on FCI stocks and any further adjustment to the E20 supply framework. Until then, India’s ethanol transition remains not only an energy-policy exercise, but also a test of how the country manages competing claims on its food and agricultural systems.
