5th September 2024 (11 Topics)
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Ethanol Push Turns India into Corn Importer
Context
India has recently embarked on a new policy paradigm to permit the blending of maize and grain-based ethanol under the National Policy on Biofuels (NPB) 2018. This policy has led to a significant change in its role in the global corn market, turning it from a major corn exporter into a net importer for the first time in decades.
Why demand for ethanol is increasing?
- Looking to curb carbon emissions, India aims to increase the share of ethanol in gasoline to 20% by 2025-26, from 13% now.
- To achieve its 20% blending target, India will need more than 10 billion litres of ethanol, which is double the volume the country produced in the marketing year ended October 2023.
- This year, around 3.5 million tons of corn has been used to make 1.35 billion litres of ethanol, about four times more than a year earlier.
- Sugarcane can start contributing more from the next season, but it cannot contribute more than 5 billion litres. The government's priority is to fulfil domestic sugar consumption.
- That would mean an increase in corn-based ethanol production to 3 billion litres, requiring nearly 8 million tons of corn.
Impact of shift in Corn demand
- Impact on Local Industries: The surge in corn prices due to increased domestic demand has significantly affected India’s poultry sector.
- Rising feed costs, driven by higher corn prices, are pushing poultry producers into financial difficulty. They are calling for government intervention, including duty-free imports and the lifting of restrictions on genetically modified (GM) corn.
- Global Market Disruptions: India's shift from exporter to importer is reshaping global corn supply chains. Countries that traditionally sourced corn from India are now looking to other suppliers, such as South America and the United States, leading to shifts in global corn prices and trade patterns.
- Environmental and Economic Goals: India’s goal to increase the ethanol blend in gasoline to 20% by 2025-26 necessitates a significant rise in corn-based ethanol production. This shift reflects India’s broader environmental and energy policy goals but also highlights challenges in balancing domestic and global market needs.
- Trade Imbalances: The reversal in India’s corn trade balance—transitioning from exporting millions of tons annually to importing a record amount—illustrates the broader impact of its domestic policy changes on international trade dynamics.
Fact Box:Maize Cultivation
Government Policies for Ethanol Push
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