India's E20 ethanol rollout cuts oil imports but raises food and water concerns.
Rice-based ethanol may consume over 10,000 litres of water per litre.
India plans higher ethanol blending despite subsidy and food security concerns.
Since April 2026, every litre of petrol dispensed at fuel stations across India contains up to 20% ethanol, marking the formal nationwide rollout of E20, a target India originally set for 2030 and then pushed forward to 2025-26.
But behind this “experiment”, lies few complications realted to about what the ethanol is made from, where the water to grow it comes from, and whether a fuel policy designed to reduce one form of dependence is quietly creating another.
Rice & Petrol
India imports more than 85% of its crude oil. For a country of 1.4 billion people with a widening current account deficit (CAD), replacing even a fraction of that with domestically produced ethanol is a serious strategic goal.
The National Policy on Biofuels, introduced in 2018, set the E20 target and expanded the permitted feedstock list beyond sugarcane to include surplus rice from Food Corporation of India stocks, broken grains and maize. The logic made a certain sense. FCI warehouses have been chronically overstocked for years, with rice stocks consistently breaching buffer norms, as documented in reports by the Comptroller and Auditor General of India.
But sugarcane, the original feedstock, hit a wall. The government was forced to ban sugarcane-to-ethanol conversion in 2023-24 after drought-triggered shortages tightened sugar availability. Grain-based ethanol, primarily from maize and rice, stepped in to fill the gap. According to the All-India Distillers Association, grains now contribute around 65% of India's ethanol production, with the remainder still coming from sugarcane. As of ESY 2025-26, India has contracted 1,059 crore litres of ethanol, of which over 515 crore litres had been supplied in the first six months alone, as reported by The Print.
The less talked about
This is where the numbers get uncomfortable. According to the NITI Aayog and Ministry of Petroleum and Natural Gas roadmap for ethanol blending, growing one kilogram of rice requires around 4,000 litres of water. Since approximately 2.5 to 3 kilograms of rice are needed to produce one litre of ethanol, the total water use can exceed 10,000 litres per litre of fuel produced.
The government has pushed back on this figure. In a 10-point rebuttal issued last week, the Ministry of Petroleum and Natural Gas rejected what it called misinformation, saying that ethanol distilleries consume about 3 to 5 litres of processed water per litre of ethanol and increasingly operate Zero Liquid Discharge systems to recycle water. The ministry's point, technically accurate, refers only to water used inside the distillery. It says nothing about the water consumed growing the rice in the first place.
Agriculture economist Devinder Sharma made this distinction explicit in analysis cited by The Tribune, arguing that Punjab farmers are routinely blamed for depleting groundwater through paddy cultivation, yet the policy simultaneously incentivises them to grow more rice for ethanol. The irony is difficult to overlook. India's most water-stressed farming belt is being asked to grow a crop that will partly end up powering cars.
The subsidy & supply chain
The government is selling FCI rice to distilleries at Rs 2,320 per quintal until October 2026, and at Rs 2,390 per quintal thereafter until June 2027. FCI's own economic cost of rice is approximately Rs 4,100 per quintal. That gap represents a substantial hidden subsidy to grain-based ethanol producers, as Business Standard noted, one that has drawn criticism from economists who argue that surplus grain is a strategic food asset rather than a fuel input. An analysis published by Ideas for India pointed out that the same stocks could be deployed for fortified grain schemes, school meals, disaster relief or urban nutrition programmes.
The Institute for Energy Economics and Financial Analysis has argued that using food-based feedstocks for ethanol production may not be the best use of land in a country where hunger remains a pressing issue. The concern is not hypothetical. India ranked 105th out of 127 countries on the 2024 Global Hunger Index, and drought years, like 2023-24, demonstrate how quickly the surplus calculus can change. When sugarcane ran short, the government pivoted to rice. The question experts are raising is what happens to the food buffer when two bad monsoons arrive in sequence.
Where the policy goes from here
India is already moving beyond E20. The government has removed central excise duty on petrol blended with 22, 25, 27 and 30% ethanol, and a draft regulatory framework for E85 and E100 is expected in FY2027. India has built significantly more ethanol capacity than is currently required for E20, meaning pressure may increase for higher blending targets to justify distillery economics rather than resource efficiency.
Maize is the feedstock most experts prefer. It carries a lower water footprint than rice and does not draw on the same political and food-security sensitivities. The constraint is supply. Maize faces competing demand from the poultry and livestock industries, making it an imperfect substitute at scale. Second-generation ethanol, made from crop residues and agricultural waste rather than edible grain, remains the cleaner long-term answer. India's 2G plant at Panipat exists as proof of concept, but continues to run below design capacity due to feedstock variability.
