India’s ethanol-blending rate for gasoline could fall to as low as 15%, from its 20% target, as the country’s weakest monsoon in over a decade hits crops used to produce the biofuel, Reuters reported on Wednesday.
The ambitious blending program helped the country reduce some of its dependence on fuel imports, saving around $21.1 billion in oil-import costs since 2014, according to government figures. The program achieved its 20% target five years ahead of schedule thanks to a sustained government-led push, which also helped farmers benefit from the savings.
However, concerns about food security in the world’s most populous nation, following a 13% rainfall deficit linked to the El Niño weather pattern, is threatening to unravel those gains.
Sugar and maize prices in India have surged around 40% from June, while rice prices have risen 20%. Retail food inflation accelerated to 7.74% in September, from 5.97% in August, Reuters reported. The price surge and supply worries have forced New Delhi to restrict ethanol production from sugar and rice stocks to blend with gasoline.
Ethanol producers now reportedly expect blending rates to fall to between 15% and 17% in the 2026-27 supply year, depending largely on maize prices.
Maize, which has become the main feedstock for ethanol following the restrictions on sugar and rice, is also used in animal feed and other industries. However, farmers are unlikely to expand winter planting despite the rising demand and record prices because of water shortages, the director of farming and commodity trading startups at ILA Commodities, Harish Galipelli, told Reuters.
“Food has to take priority over fuel, more so in a drought year,” the chairman of agri and food business company KN Agri Resources, G.K. Sood, told Reuters, estimating that blending could fall to around 15%.