The ethanol mixture should not be heavy on your plate! The race to make fuel from corn threatens food inflation

New ethanol tenders issued by state-owned oil companies for E20 petrol include corn as a key ingredient. The tender received 59 percent of proposals for ethanol production from corn, up from 37 percent last year. This has raised concerns that the large-scale use of corn for ethanol production could increase the cost of animal feed, which could also increase the price of eggs and chicken. This situation has arisen when the government has reduced the price of ethanol made from corn by Rs 3 per litre. Maize prices have already doubled compared to last year, while production is expected to fall by 15 percent in the kharif season, which could exacerbate the supply problem. Experts believe that if grain prices rise further, costs for poultry farmers will increase, making eggs and chicken more expensive.

Prices doubled and production fell

Maize is an important part of animal feed and is also used to make starch for the processed food and paper industries. Maize accounts for 60 percent of poultry feed and is also a major raw material for the starch industry. Maize prices have doubled compared to last year amid a drop in maize production in the kharif season by around 15 per cent. In the first round of allocation for Ethanol Supply Year (ESY) 2025-26, ethanol produced from corn accounted for about 45 per cent of the total allocated quantity. At the same time, corn-based ethanol accounted for about 41 percent of the total ethanol supply as of September 2026. Ethanol production from corn accounted for 59 percent of the proposals received by OMCs for the first tender of ethanol supply year (ESY) 2026-27, up from 45 percent last year.

Why did the demand for corn increase?

For the ethanol supply year 2026-27, OMCs have floated tenders to purchase 11 billion liters of ethanol, while ethanol producers have offered 19.35 billion liters of ethanol, which is about 1.8 times more than OMCs’ requirement. The increase in proposals to produce ethanol from grain comes after the government eliminated the use of sugarcane juice, B-heavy molasses and sugar syrup as feedstock for the ethanol blending program as drought adversely affected sugarcane production. While one segment of the ethanol industry believes that increased corn supplies indicate that there is no shortage of feedstock, others are concerned about the consequences of increasing the use of corn for ethanol to meet the E20 goal. Agriculture expert GK Sood said in an ET report that we can see that while bidding for ethanol purchase tenders from oil companies, ethanol producers have offered their full capacity. During the 2025-26 ethanol year, grain-based ethanol accounted for 72 percent of the total supply and sugar-based ethanol accounted for 28 percent.

Corn may become more expensive

The government has set a limit of 7.2 million tonnes (i.e. equivalent to 324 crore liters) on the use of surplus rice from FCI for ethanol production. In such a situation, the supply of ethanol made from corn and spoiled grains will have to be increased. Maize prices have doubled compared to last year. In such a situation, the corn-based industry fears that its prices may rise further due to increased demand for corn from users such as poultry and ethanol producers. Sugar industry expert Kapil Nema said in an ET report that the competition is most likely to be intense in the case of maize as the allocation process is in the order of ‘C heavy molasses’, surplus grain, spoiled grain and rising prices of maize.

What do the experts say?

Due to reduced feedstock availability, actual contract volumes for certain feedstocks are expected to be lower. Agriculture expert GK Sood said in a media report that when a product is in short supply, it goes to the best bidder. The poultry industry will suffer if the government pays higher prices for corn-based ethanol. And if the government does not provide higher prices, ethanol production may be affected.

Experts say the ethanol blend percentage may have to change due to scarcity of feedstock used to make ethanol. Although distilleries have offered large supplies of corn, factors such as food security priorities and corn prices will determine how much corn-based ethanol will actually be available. Nema said the offer data needs to be looked at carefully. Only the quantity determined on the basis of capacity and feedstock related restrictions will affect the final allocation.