Govt Plans to Procure More Maize to Ramp up Production of Ethanol

March 05, 2024

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by Zia Haq (Hindustan Times) ... India has drawn up plans to divert more maize to make ethanol for the country’s fuel-blending programme and ramp up output nearly 10 times in five years, three officials said on Monday.

Maize, or corn, the third most-grown cereal, has emerged as a strategically important commercial crop in the country because of its use in making ethanol, which is blended with petrol (HT)

The Union government has also signed off on a scheme to procure maize at federally fixed minimum support prices (MSP) and supply it to distilleries, as part of a strategy to meet India’s biofuels needs.

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Maize, or corn, the third most-grown cereal, has emerged as a strategically important commercial crop in the country because of its use in making ethanol, which is blended with petrol. It is also an important poultry feed.

The country aims to lessen the use of sugarcane-based ethanol over the years and utilise more maize grown in a sustainable way for which the Union government has approved new research projects worth ₹24.51 crore, according to documents seen by HT.

Mixing of petrol with ethanol, which is made from molasses, a byproduct of sugar, is a high-priority national programme to help lessen the amount of oil India imports. Ethanol can also be produced from rice and maize. On June 5, 2021, Prime Minister Narendra Modi had announced the advancing of the target year for 20% ethanol-blending in petrol by to 2025.

The Union government has set aside ₹15.46 crore for the state-run Indian Institute of Maize Research (IIMR) to increase corn production in the catchment areas of ethanol industries, food secretary Sanjeev Chopra told HT. The IIMR will disseminate best-management practices and hybrids in 15 catchment areas in 78 districts of 16 states.

Scientists from IIMR have also been mandated to step up research for climate-resilient high-starch maize hybrids by financial year 2025-26, for which ₹5.32 crore has been earmarked. Another ₹3.73 crore has been set aside for scaling up silage or the maize feed value chain, according to the documents.

The agriculture ministry has set a target to raise corn production by 10 million tonnes over the next five years as demand for ethanol production grows, besides higher demand from the poultry industry, a second official said, requesting anonymity. Maize output in 2022-23 was estimated to be 34.6 million tonnes compared to 33.7 million tonnes in the previous year.

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Two state-backed food agencies, NAFED and NCCF, apart from primary agricultural cooperative societies, will be involved in purchasing corn from farmers. The procured maize will be offered to distilleries at MSP plus market taxes, while all incidental costs will be borne by the food department, the food secretary said.

Procurement refers to the government’s purchases of food commodities at MSP — a floor price set to stave off distress sales by farmers. The minimum rate for maize for 2023-24 stands ₹2,090 a quintal. READ MORE

Related articles

Maize is in high demand for ethanol production. But don’t procure it at MSP (The Print)
Rising corn prices to potentially weigh on India's ethanol blending mandate (S&P Global)
India May Devote More Sugar to Ethanol in Blow to Export Hopes (Financial Post/Bloomberg)
US offers to assist India to achieve ethanol blending target (ChiniMandi)
Corn ethanol to transform India’s energy landscape and will be panacea for rapid socio-economic development for rural India (Economic Times Energy World)

Excerpt from The Print: In a study published in 2022, my colleagues and I (Siraj Hussain) had examined the availability of maize for production of ethanol. Our study projected various scenarios until 2025-26 and found that in the best-case scenario, 10.1 billion litres of ethanol would be available from all sources out of which 8.4 billion litres would come from sugarcane, 1.62 billion litres from rice and only 0.11 billion litres from maize.

We had also projected that out of total production of 10.1 billion litres, 8.1 billion litres of ethanol will be available for blending of petrol and 2 billion litres will be used for other purposes. At these levels, a blending of 16 per cent would be achieved in 2025-26.

In ethanol supply year 2022-23, only 197.6 million litres of ethanol was produced from maize. This was just about 5 per cent of ethanol production.

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As per the projections in NITI Aayog’s roadmap, out of the requirement of 10.16 billion litres of ethanol, 54 per cent was to come from sugarcane and the remaining about 46 per cent from foodgrains. E20 blending is projected to save about $ 4 billion per annum. However, the NITI Aayog roadmap did not detail the specific quantity of rice or maize, which would be used for ethanol.

The poultry feed industry is the largest consumer of maize, using about 60 per cent of the maize produced. Out of about 35 mt of maize production, the poultry sector takes about 21 million tonnes. Starch companies and breweries are estimated to use about 10 mt of maize and only about 2 mt goes for direct human consumption.

The oil marketing companies (OMCs) have announced an additional incentive of Rs 5.79 per litre for ethanol from maize and other grains. Thus, the grain-based distilleries will receive Rs 71.86 per litre for ethanol. These distilleries were earlier supplying ethanol to nearby depots of OMCs. Now due to a recent policy change, the OMCs are asking distilleries to transport ethanol over long distances, thus affecting their viability.

Due to non-availability of rice for ethanol, the grain-based distilleries will be forced to purchase maize from the open market, which will hopefully deliver MSP to farmers but severely hit the poultry industry. The cost of eggs and chicken is then likely to rise. Its impact on nutrition is not yet estimated.

According to an expert estimate, 16.5 mt of maize, a little less than half of India’s production, may be required for ethanol by 2025 if 20 per cent blending has to be achieved. This is clearly not possible unless production goes up substantially. For this, single cross hybrid with Fall Armyworm-resistant biotech traits may be necessary. READ MORE

Excerpt from S&P Global: "The prices have increased sharply due to a likely drop in output," said a trader based in Nizamabad, adding that prices could rise further if heat waves expected across central India impact corn production.

Apart from lower production, a rise in demand from the poultry sector is also likely to push prices up, market participants said.

Corn prices in key physical markets were currently around Rupees 23,000-23,500/mt ($275.71-$281.70/mt) as of April 2.

In contrast, the government plans to purchase corn at a minimum support price of Rupees 20,910/mt through its agencies and supply it to produce ethanol.

The government has rolled out plans to procure corn through the National Agricultural Cooperative Marketing Federation of India and the National Cooperative Consumers Federation of India and supply it to distillers for producing ethanol.

Under the program, the government agencies will enter into five-year agreements with farmers to buy corn and supply the feedstock for production of clean fuel, government officials added.

The primary objective of the plan is to ensure uninterrupted supplies of feedstocks to distillers to produce ethanol, a government official said.

The plan is pivotal to India achieving its target of blending 20% ethanol with gasoline by 2025. It would also boost efforts to increase ethanol blending with gasoline, which was at 12% in marketing year 2022-23 (November-October). The government wants to achieve a blending target of 15% in MY 2024-25.

Corn is a crucial feedstock for India to achieve its ethanol blending target. The country mainly sources ethanol from sugarcane and corn.

The government is making moves to increase corn as feedstock for ethanol even as markets participants are concerned over a likely drop in sugarcane output due to poor rainfall.

Government agencies have so far signed memorandums of understanding with around 40 distilleries to produce clean fuel. However, they are yet to sign the final contracts to supply corn to ethanol producers. READ MORE

Excerpt from Financial Post/Bloomberg: India may allow sugar mills to use more of the sweetener to make ethanol, in a move likely to reduce the odds of easing export curbs any time soon, according to a person familiar with the matter.

India may allow sugar mills to use more of the sweetener to make ethanol, in a move likely to reduce the odds of easing export curbs any time soon, according to a person familiar with the matter.

The government is considering a proposal to permit factories to use an additional 800,000 tons of sugar for biofuel this year, as the crop is likely to be higher than predicted, said the person, who asked not to be identified as the talks are confidential. That would be on top of 1.7 million tons allocated earlier.

The second-biggest sugar producer will refrain from releasing any export quota in the near future, said the person, damping industry’s hopes of shipping as much as 1 million tons in the current season ending September. The move by India is likely to support global sugar prices that have fallen this month.

The nation extended its export restrictions in October to protect domestic supplies ahead of national elections. The administration of Prime Minister Narendra Modi, who is seeking a third five-year term in polls starting this month, has taken several steps to contain high food prices. It curbed shipments of wheat and rice, sold grains from state reserves in the open market and cracked down on hoarding.

The move would help sugar mills and ethanol distilleries that have invested as much as 150 billion rupees ($1.8 billion) in three years to increase cane-based ethanol capacity. It will also help the factories make timely payments to farmers. The country has a goal to blend 15% of ethanol in gasoline in 2023-24. READ MORE

Excerpt from ChiniMandi: A delegation from the US agribusiness sector has proposed that India import ethanol and corn for feedstock to fulfil its ethanol blending target by 2025. This proposal comes in response to India’s decision to limit the use of sugar for the production of ethanol, reported Economic Times.

Alexis Taylor, the United States undersecretary for the Department of Agriculture leading the trade mission to New Delhi, emphasised the opportunity to assist India in increasing ethanol production. Taylor held discussions with officials from the ministries of agriculture, external affairs, and commerce & industry. India aims to introduce 20% ethanol-blended petrol (E20) by 2025. However, due to lower sugarcane production, the government banned the use of cane juice and B-heavy molasses for ethanol production in December.

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Taylor highlighted that importing ethanol and corn for feedstock could similarly stimulate investment in ethanol production in India.

India is encouraging the use of maize as an alternative to sugar to enhance ethanol production and ensure an adequate supply of sweeteners in the market. However, according to the second advance estimate issued by the Ministry of Agriculture and Farmers’ Welfare, maise production is expected to decline to 32.4 MT from the previous year’s 38 MT. Traders indicate that this decrease may not meet demand once distilleries begin producing ethanol using maise. READ MORE