Ethanol program as a tool for the development of India's agricultural sector

India’s Ethanol Blended Petrol Programme, aimed at strengthening the country's energy security, is having a significant impact on agriculture. Since the inception of the programme in 2014–15 under the Ethanol Supply Year (ESY), Indian farmers have received over ₹1.66 lakh crore through value chains. This mechanism shifts a portion of agricultural produce to the energy sector, providing direct access to the fuel market.

For sugar producers, the programme has become an important economic buffer. During periods of surplus stocks and price pressure, sugar mills have gained the ability to divert raw materials — including B-heavy molasses, sugarcane, and syrup — to ethanol production. This generates additional income for the enterprises, which directly improves mill liquidity and allows them to settle payments with farmers in a timely manner.

The scale of demand for agricultural produce is growing: in ESY 2024–25, oil and gas companies procured over 1,000 crore litres of ethanol. Following the sugar industry, other crops are being involved in the process, in particular maize. The set procurement price for ethanol from maize at approximately ₹71.86 per litre serves as an incentive for farmers, allowing them to diversify production and reduce risks. Also, in ESY 2025–26, the use of 72 lakh metric tonnes of surplus rice stored in FCI has been approved for ethanol production.

The development of this market stimulates investment in the necessary infrastructure: distillation capacities, transport networks, and storage. Production figures show significant growth: from 421 crore litres in 2014 to nearly 2,000 crore litres by 2026. This process promotes rural industrialization, creating jobs in the fields of logistics, engineering, and maintenance. State-owned companies have already signed 233 long-term off-take agreements with dedicated plants, ensuring stability for market participants. Thus, India's farmers are becoming not only food producers but also suppliers of energy resources.