"Sugar Price Spike Exposes Food-Fuel Trade-off in Ethanol Blending Policy"
Ethanol Blended Petrol (EBP) Programme
government scheme to blend ethanol with petrol to reduce crude oil imports and carbon emissions
Food-fuel trade-off
competition between using an agricultural commodity as food versus as biofuel feedstock
India's food security system rests on a network of institutions built over decades. The National Food Security Act (NFSA), 2013 provides legal entitlement to subsidised foodgrains for approximately 800 million people. The Food Corporation of India (FCI) manages procurement, storage, and buffer stocks. The Public Distribution System (PDS) handles last-mile delivery, now strengthened by the One Nation One Ration Card (ONORC) scheme for migrant workers.
Parallel to this, India has pursued energy self-reliance through the Ethanol Blended Petrol (EBP) Programme. The programme aims to reduce dependence on imported crude oil, cut carbon emissions, and support sugarcane farmers. Ethanol blending in petrol rose from 1.53% in 2013–14 to around 5% by 2019–20, and reached 20% in 2025–26. This rapid acceleration was a deliberate policy push. The sugar sector, heavily regulated on pricing, sales, imports, exports, and feedstock allocation, became the primary source of ethanol feedstock.
The sugar sector in India is among the most regulated agricultural markets in the world. Sugarcane prices are set by the government through the Fair and Remunerative Price (FRP) mechanism. Sugar sales, exports, and imports are also subject to government control. This means that when supply tightens, the government cannot rely on market signals alone to correct the imbalance. Policy decisions directly determine outcomes, and policy failures directly cause price shocks.
The food-fuel trade-off arises when the same agricultural commodity, sugar, rice, or maize, serves both as food and as feedstock for ethanol. When ethanol demand grows faster than agricultural supply, it competes with food markets. This competition raises food prices and threatens food security, especially for low-income households.
In India's ethanol programme, three feedstocks are used: sugarcane-derived sugar and B-heavy molasses, surplus rice from FCI stocks, and maize. Each carries its own food-security risk. Diverting sugar to ethanol reduces sugar available for consumption. Using FCI rice stocks is viable only when genuine surpluses exist above buffer norms. Maize is the most promising alternative, it uses less water than rice or sugarcane, but India's maize productivity is only around 3.5 tonnes per hectare, far below the US average of 11 tonnes per hectare. …
What are the causes of persistent high food inflation in India? Comment on the effectiveness of the monetary policy of the RBI to control this type of inflation.
Elucidate the importance of buffer stocks for stabilizing agricultural prices in India. What are the challenges associated with the storage of buffer stock? Discuss.
With reference to the provisions made under the National Food Security Act, 2013, consider the following statements :
1.The families coming under the category of 'below poverty line (BPL)' only are eligible to receive subsidised food grains.
2.The eldest woman in a household, of age 18 years or above, shall be the head of the household for the purpose of issuance of a ration card.
3.Pregnant women and lactating mothers are entitled to a 'take-home ration' of 1600 calories per day during pregnancy and for six months thereafter.
Which of the statements given above is/are correct?
The economic cost of food grains to the Food Corporation of India is Minimum Support Price and bonus (if any) paid to the farmers plus
Consider the following statements regarding India's Ethanol Blended Petrol (EBP) Programme:
1.Ethanol blending in petrol was approximately 1.53% in 2013–14.
2.India achieved 20% ethanol blending in petrol by 2025–26.
3.Sugarcane-derived ethanol is the only feedstock permitted under the EBP Programme.
4.Oil Marketing Companies are currently required to source ethanol from a government-fixed feedstock allocation.
Which of the statements given above are correct?
With reference to India's sugar sector and ethanol policy, consider the following pairs:
Item — Correct Description
1.Fair and Remunerative Price (FRP) — Minimum price set by the government for sugarcane paid by sugar mills
2.Sugar year — April to March
3.Buffer stock norm — Minimum and maximum foodgrain stock levels FCI must maintain
4.Economic cost of foodgrains (FCI) — MSP plus procurement incidentals and distribution cost
How many of the above pairs are correctly matched?
Consider the following statements regarding India's food security and ethanol feedstock policy:
1.FCI rice stocks can be used as ethanol feedstock only when they exceed prescribed buffer norms.
2.India's maize productivity is approximately 3.5 tonnes per hectare, compared to around 11 tonnes per hectare in the United States.
3.The import duty on refined sugar in India is currently 50 per cent.
4.The National Food Security Act, 2013 covers approximately 800 million people.
Which of the statements given above is/are correct?
Which of the following best explains why a sharp rise in sugar prices in India is described as a 'policy failure' rather than a 'market failure'?
Assertion (A): Shifting ethanol feedstock from sugar to maize does not fully eliminate the food-fuel trade-off in India.
Reason (R): Maize is the primary feed for poultry, dairy, and egg production, so increased maize diversion to ethanol raises food prices across these sectors.
Want the full note, Prelims Facts & MCQ answers?
Create a free account — takes less than a minute.
Create free account