No Question of Ethanol Inclusion in India-US Deal: ISMA’s Deepak Ballani

Why It Matters

Excluding ethanol safeguards India’s biofuel strategy, farmer earnings, and net‑zero targets, while the current policy complexity threatens sector profitability and investment confidence.

Key Takeaways

• Ethanol excluded from India‑US trade framework
• Sugar export quota increased to 20 LT for 2025‑26
• Maize ethanol surge threatens pulse and oilseed balance
• Complex allocation rules limit sugar‑based ethanol utilization
• Simplified 50:50 feedstock split could boost sector profitability

Pulse Analysis

The India‑US trade framework, announced in early 2026, deliberately leaves ethanol out of its scope, a move that reflects New Delhi’s priority to protect its burgeoning bio‑fuel programme. By keeping ethanol off the table, the government shields domestic sugar‑cane‑based production from foreign competition, preserving a critical source of farmer income and supporting the country’s 20 % blending target. This stance also aligns with broader trade negotiations, where the United States seeks greater market access for its agricultural commodities but faces limited leverage in a market already saturated with surplus ethanol capacity.

Domestically, the sugar industry grapples with a paradox of abundant capacity and under‑utilisation. While India boasts roughly 2,000 crore litres of ethanol plants, only half of that is currently consumed, prompting a policy‑driven pivot toward maize‑based ethanol. The rapid expansion of maize cultivation has displaced pulses and oilseeds, raising food‑security concerns and distorting the crop mix. Moreover, the existing allocation formula—laden with surplus‑deficit metrics, distance norms, and yearly caps—has relegated sugar‑based ethanol to a mere 28 % of the blend, leaving many mills operating at unsustainable 40 % capacity.

Industry leaders, including ISMA, argue for a streamlined 50:50 feedstock allocation that would simplify procurement, improve price predictability, and unlock the Rs 40,000 crore investment already made in ethanol infrastructure. Such a reform would not only enhance profitability but also dovetail with NITI Aayog’s net‑zero roadmap, which positions bio‑ethanol and CBG as pivotal low‑carbon fuels. A clearer, investor‑friendly policy could accelerate capacity utilisation, support farmer incomes, and reinforce India’s commitment to a sustainable energy transition.