The economic survey has raised concerns that a higher price for maize-based ethanol compared to biofuels derived from rice and molasses has led to increase in production and area under the coarse cereal variety.
However the pulses acreage has declined while areas under oilseeds have witnessed moderate increase.
This may impact crop diversity and food security, while the survey calls for steps for balancing food as well as energy security.
“Between FY22 and FY25, the administered price of maize-based ethanol increased at a CAGR of 11.7%, growing materially faster than ethanol derived from rice or molasses. This has created a strong and persistent price signal in favour of maize,” the survey stated.
The government annually fixes administered per-litre ethanol prices differentiated by feedstock – molasses, maize and rice, with assured offtake by the oil marketing companies.
In the last four fiscals, maize output and cultivated area has grown at a CAGR of 8.77% and 6.68% respectively, while pulses’ output and acreage has declined. The area under oilseeds and cereals excluding maize, during the same period increased moderately at 1.7% and 2.9% respectively.
Regional Crop Competition
In Maharashtra and Karnataka, maize increasingly competes directly with pulses, oilseeds, soyabean, millets, and cotton for land, water, and labour.
Over time, this imbalance risks entrenching India’s dependence on edible oil imports and exposing domestic food prices to greater volatility during supply shocks, it stated
India imports 58% and 18%-20% of its cooking oils and pulses consumption.
“The ethanol blending program ensured that surplus in the production of the crop was used to meet the needs of the energy markets and the surplus did not lead to collapses in product prices leading to volatile cycles of surpluses followed by deficits,” Samir Somaiya, Chairman and Managing Director, Godavari Biorefineries, one of the biggest producer of ethanol, told FE.
Foreign Exchange Savings
Somaiya said India has achieved a ‘remarkable’ 20% ethanol blending with petrol, five years ahead of the earlier target of 2030 by making sure ethanol is produced from sugarcane, maize and a variety of other feedstocks.
The ethanol blending has saved India more than Rs 1.44 lakh crore in foreign exchange and facilitated the substitution of about 24.5 million tonne of crude oil, according to the survey.
For creating a balance between energy and food security, the survey has recommended a formulation of a roadmap could include accelerating yield improvements in pulses and oilseeds to restore their relative profitability, avoiding distortions in input and output markets that confer an undue advantage to specific feedstocks.
Observing that expected reduction in paddy acreage has not materialised, the survey noted that pulses and oilseeds are structurally important to India’s consumption basket and nutritional outcomes, yet they are shifting lower down the priority order for the farmers.