ETHANOL FALLOUT: ‘Food Vs Fuel’ scenario deepens as sugar prices continue to soar

India’s drive towards cleaner fuel is increasingly confronting a question that reaches far beyond petrol pumps: how much of the country’s sugarcane should go into fuel tanks and how much should remain available for food?

The debate has sharpened in the past few days as sugar prices climb, with the country heading into a festival season when demand for sweets and processed foods traditionally rises. The prices for sugar have gone up by around 20% marking a dent in consumers’ pockets. At the same time, increasing quantities of sugarcane are being diverted towards ethanol as India pursues its E20 blending target.

Sugarcane accounts for around 30–35% of ethanol feedstock. While the diversion supports India’s effort to reduce dependence on imported crude oil, it can also tighten sugar supplies. The problem has been compounded by lower cane productivity and sugar recovery in parts of Uttar Pradesh due to crop disease, despite higher cultivation acreage. All stakeholders seem to be pulling the narrative in their own respective directions.

Modi Govt Defends Ethanol Policy

The central government has attributed the decline in sugar production to factors such as red rot disease and water scarcity linked to El Niño conditions.

To contain the resulting price pressures, it has introduced measures including stock limits, duty-free imports of raw sugar, restrictions on exports and physical verification of sugar mills. In addition, the government has permitted duty-free imports of up to 10 lakh tonnes of raw sugar until October 31 to augment domestic supplies and ease sugar prices.

Demand for Decentralising Ethanol Production

While consumers are bearing the brunt of rising sugar prices, farmer organisations such as Karnataka’s State Sugarcane Growers’ Association are calling for a broader approach to ethanol production. The association has urged the government to allow jaggery units to produce ethanol as well.

According to the association, the sharp rise in sugar prices is partly linked to the “substantial profits” sugar factories are earning from ethanol production. It argues that the benefits of the growing ethanol market should not remain limited to large sugar mills and should also reach smaller jaggery producers and cane growers.

At the same time, there is growing support for prioritising ethanol production from surplus sugarcane during years of high output. Such an approach, proponents argue, could help absorb excess cane while supporting the country’s ethanol-blending programme and reducing pressure on the sugar market.

Need of The Hour

The debate is not simply about sugar prices. It is about how India balances two forms of security: affordable food and reduced dependence on imported energy.

Experts argue that the energy transition should not burden consumers and sugarcane diversion for ethanol production must not increase food prices.

The policy dilemma is becoming harder to ignore. Ethanol offers energy security, while sugar supports food consumption, farmers and the rural economy. As Chief Economic Adviser V Anantha Nageswaran has argued, India should pause at E20 until it has properly assessed the “food-versus-fuel trade-off”.

For India, the challenge is no longer choosing between food and fuel in absolute terms, but finding a balance where the pursuit of one does not make the other more expensive.