India’s Ethanol Push Creates Domino Effect, Pushing Up Prices, Impacting Farmers
Maize-based ethanol was meant to be a sustainable fuel solution in India, decreasing reliance on fossil fuels. But the sudden surge in maize diversion for ethanol production has inadvertently set off a chain reaction, impacting poultry prices, cooking oil costs, and putting pressure on the incomes of farmers growing competing crops.
Despite a drop in maize availability, India’s ethanol ambitions have surged ahead. While the ethanol-blending rate with petrol has reached 13%, future targets aim for a 20% mix by 2025, necessitating even more maize. The government’s goal is to reduce dependence on costly imported crude oil, but the ripple effects are generating a complex economic web.
## A Closer Look at India’s Poultry Pinch
The poultry industry, heavily reliant on maize for animal feed, felt the blow first. With maize, accounting for 60% of maize production, diverted to ethanol, prices began a steep ascension. Poultry producers faced a double whammy, with feed costs soaring and hurting the margins for poultry.
“The poultry industry is facing a severe maize shortage,” explains Dr. KG Anand, general manager (south) of Venkateshwara Hatcheries, better known as Venky’s. “In 2023-24, maize for ethanol production jumped from 1 million tonnes to 7 million tonnes. Projections for the upcoming year show a further increase to 13 million tonnes.”
The rush on maize is already squeezing profits. From barnyard to kitchen table, the rise is reflected. Consumers are paying more for poultry meat and eggs, but the price hikes haven’t been enough to fully offset rising input costs, impacting farmer profits and potentially shrinking the poultry market, impacting livelihood.
## The Oilseed Stand Confusion:
The ripple effect doesn’t stop at poultry farms. Soybean, a crucial oilseed and a key source of oilmeal used in animal feed, has been impacted, with prices slumping below the minimum support price, squeezing farmer incomes.
“The price of soybean has been almost consistently below MSP,” says one soybean farmer.
To shield soybean farmers from the market slump, the government has increased import duties on cooking oils, trying to help local oilseed producers by bolstering prices, but the measure’s effectiveness has been limited, leaving it caught between the kitchen doesn’t settle issues: less than 40% allocation of ethanol to the sugar industry and the temporary halting of exports, leading to a drop in prices. This threatens both production and farmer incomes.
Weak oilseed prices, reflected in falling oilmeal prices, sent shockwaves through the industry.
Maize-derived distillers dried grains soluble (DDGS) is now flooding the market, compelling oilmeal prices down further, as DDGS stands to compete with oilmeals in cattle feed.
It’s not only about high feed costs but also about where those costs land:
The Institute of Protein
*Cell cultures have also taken a hit.
Soybean processors are struggling as both oilmeal revenues have fallen. With a reduced appetite for soybean meal, soybean farmers are grappling with shrinking profits, highlighting the broader effects of ethanol.
Fuel hole prices are also felt in
The government has adopted a range of measures to mitigate the situation, including importing maize from neighbouring countries to ensure supply. Agencies like the National Cooperative Consumers Federation work on increasing local production and assuring farmers of quality maize seeds.
Furthermore, India has transitioned from a maize exporter to a net importer, having
What are the unintended consequences of India’s ethanol program being discussed in the passage?
## India’s Ethanol Push: A Pricey Solution?
**Host:** Welcome back to the show. Today, we’re diving into India’s ambitious ethanol program and its unintended consequences. Joining us is Dr. Alex Reed, an agricultural economist who has been closely following this issue. Dr. Alex Reed, thank you for being here.
**Dr. Alex Reed:** It’s a pleasure to be here. This is a complex issue with far-reaching implications for India’s food security and economy.
**Host:** Let’s start with the basics. Can you explain the government’s goal with this ethanol program?
**Dr. Alex Reed:** Essentially, India is trying to reduce its reliance on expensive imported crude oil by blending gasoline with ethanol, a biofuel that can be produced from crops like maize. The target is to reach a 20% ethanol blend in gasoline by 2025, which is known as E20. [[1](https://www.niti.gov.in/sites/default/files/2021-06/EthanolBlendingInIndia_compressed.pdf)]
**Host:** Sounds good on paper, but there seem to be some unintended consequences.
**Dr. Alex Reed:** Absolutely. The sudden surge in demand for maize for ethanol production has led to a sharp increase in maize prices. This has hit the poultry industry particularly hard, as maize is a key ingredient in poultry feed. [[1](https://www.niti.gov.in/sites/default/files/2021-06/EthanolBlendingInIndia_compressed.pdf)]
**Host:** And that impact is trickling down to consumers, right?
**Dr. Alex Reed:** Precisely. Increased feed costs are forcing poultry producers to raise prices for meat and eggs. This is putting pressure on household budgets, especially for low-income families who rely on affordable protein sources.
**Host:** Are there any other sectors feeling the squeeze?
**Dr. Alex Reed:** Yes. The edible oil industry is also affected. Farmers are switching to cultivating maize for ethanol, leading to a shortage of oilseeds like soybean and sunflower, which in turn drives up cooking oil prices.
**Host:** So, what’s the solution?
**Dr. Alex Reed:** This isn’t a simple problem with easy solutions. We need a balanced approach that considers both energy security and food security. Perhaps diversifying feedstocks for ethanol production beyond maize, and supporting farmers growing alternative crops, could provide some relief.
**Host:** A thought-provoking analysis, Dr. Alex Reed. Thank you for shedding light on this important issue.
