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April 14, 2025 – India’s rush to blend ethanol into gasoline, a policy championed as a win for energy independence and farmer incomes, is coming under fresh scrutiny for its uneven distribution of costs. New analysis shows that the country’s poorest households, water-stressed farming regions, and millions of two-wheeler riders are bearing the heaviest price tag, while the benefits flow largely to car owners and private ethanol producers.
The critique draws on decades-old ecological economics, reframed for today’s India. The core insight: a policy that diverts grain to fuel tanks, exhausts groundwater, and wears down older engines is not a national bargain when the poor pay in food, health, and repair bills.
India’s state-run oil marketing companies have spent more than $20 billion on ethanol procurement over the last three years, buying over 700 crore litres in the 2025-26 supply year alone. The government defends the program by arguing that only surplus grain is used after meeting food security needs. But the numbers tell a different story.
The Food Corporation of India buys rice from farmers at roughly ₹44 per kg, then sells it to ethanol distilleries at about ₹23 per kg—a deep subsidy that shifts public food-security funds into private fuel tanks. Meanwhile, the National Food Security Act provides free grain to nearly 800 million people. Every tonne of rice diverted to ethanol tightens a system already stretched thin.
As maize is also pulled into ethanol production, farmers are shifting away from pulses and oilseeds, essential for poor households. The result is rising food prices and greater market volatility. India’s ethanol policy is effectively reshaping what the country grows and who can afford to eat well.
The environmental ledger is equally lopsided. India’s three main ethanol feedstocks—rice, sugarcane, and maize—all require far more water per tonne than global averages. Rice, grown heavily in western and southern India, draws on blue water from rapidly depleting aquifers. Sugarcane, concentrated in water-stressed states like Maharashtra and Uttar Pradesh, demands continuous irrigation. Maize, with low hectare yields, uses roughly double the global average water footprint.
Meeting India’s blending targets will require diverting 7–8 million hectares of cropland. This land conversion risks pushing agriculture into forest margins, releasing stored soil carbon and undermining the climate benefits ethanol is supposed to deliver. Upstream, intensive fertilizer use and groundwater pumping add to the ecological debt.
The human toll is severe. Sugarcane harvesting, still largely manual, exposes workers to extreme heat and a high incidence of chronic kidney disease. These health costs are omitted from official cost-benefit analyses.
The mechanical impact of ethanol maps directly onto India’s economic divides. Vehicles built after April 2023 have electronic fuel injection and upgraded materials that handle ethanol blends with a modest 2–5% efficiency loss. But older carbureted vehicles—which dominate India’s roads—suffer a 15–20% drop in mileage, along with corroded fuel lines and cracked carburetors.
Two-wheelers account for 70–75% of all registered vehicles in India, with an average working life of 12–15 years. The vast majority predate the 2023 mandate and are used by delivery workers, commuters, and small traders for whom a two-wheeler is an economic necessity. These owners face out-of-pocket repairs with no manufacturer support. In contrast, private car owners—only 7.5–8% of households—tend to be wealthier and drive newer, fuel-injected models.
The pattern mirrors the early years of the US corn ethanol program, which began as a response to oil shocks and later expanded under the Renewable Fuel Standard. American studies showed that ethanol mandates raised corn prices, hurting livestock farmers and low-income consumers, while providing only modest greenhouse gas reductions when land-use changes were factored in. India’s program risks repeating those mistakes on a larger scale, with a more vulnerable population.
“The US learned that ethanol brings hidden costs—food price spikes, water stress, and engine damage for older vehicles,” says Dr. Raj Patel, a food systems expert at the University of Texas. “India’s poor are already absorbing those costs, but without the safety net that American consumers had.”
When food security, environmental strain, and vehicle mechanics are combined, a clear picture emerges: a policy aimed at reducing oil imports and supporting farmers is being paid for by those who can least afford it. Poor households dependent on public grain, farming communities in water-scarce regions, and the two-wheeler-riding majority are all shouldering the burden.
As India pushes toward its 20% ethanol blending target
