The National Policy on Biofuels (NPB), announced by the Ministry of Petroleum and Natural Gas in June 2018 and amended in June 2022, targeted 20% ethanol blending with petrol (E20) by 2030. Subsequently, in June 2021, NITI Aayog released its 2020–25 roadmap for ethanol blending, prepared under Dr. Rakesh Sarwal, Additional Secretary, NITI Aayog. Few could have predicted that a small by-product of ethanol production would later disrupt agricultural markets and severely impact soybean farmers.
Sources of Ethanol: Grains Surpass Sugarcane
NITI Aayog initially projected that 54% of ethanol would come from sugarcane-based feedstock and the rest from food grains. However, by the Ethanol Supply Year (ESY) 2024–25, this ratio is expected to reverse. Of the 10.77 billion litres of ethanol contracted by public sector oil marketing companies (OMCs), about 3.5 billion litres (32%) will come from sugarcane and 7.3 billion litres (68%) from food grains.
Corn Takes the Lead
Corn alone will contribute around 5 billion litres (46%) of ethanol, consuming 13.1 million tonnes of the nation’s 42 million tonnes of corn production. Additionally, 1.2 billion litres will come from rice supplied by the Food Corporation of India (FCI) at INR 22.50/kg, though its economic cost is INR 4,173/quintal. The government has allocated 5.2 million tonnes of rice for ethanol manufacture, entailing a subsidy of roughly INR 10,000 crore.
Rise of DDGS: The By-Product Changing Markets
A key by-product of ethanol production from maize and rice is Distiller’s Dried Grains with Solubles (DDGS)—a protein-rich feed ingredient. DDGS from maize contains 28–30% protein, while that from rice has about 45%. India is projected to produce 3.9 million tonnes of maize DDGS and 1.25 million tonnes of rice DDGS in 2024–25, adding 5.15 million tonnes of new protein feed to the market.
Soybean Market Under Pressure
Before the ethanol boom, the main source of livestock protein was de-oiled cakes (DOCs) from oilseeds like soybean, mustard, and groundnut. Soybean meal, with 40–45% protein, was the preferred poultry and cattle feed and a major export. Now, cheaper DDGS—priced at INR 15,500–20,000 per tonne versus INR 31,000–32,000 for soybean meal—has displaced soybean DOC.
Consequently, soybean prices have dropped below the MSP of INR 4,892 per quintal, with market rates between INR 3,200–4,200 in 2023–25. The MSP for 2025–26 is INR 5,328, yet farmers expect less. The area under soybean has declined from 12.7 to 12 million ha, while maize cultivation has expanded from 7.9 to 9.5 million ha due to higher demand from distilleries.
Experts at Globoil India emphasized that government policy should incentivize protein crops to reduce pulse imports and ensure food security takes precedence over mobility security.
Source: Money Control
