Headlines Change. But Does Our Understanding Change Too?
A few months ago, the Government’s decision on GST for popcorn dominated social media. Overnight, television studios, YouTube channels, Facebook posts, and X (formerly Twitter) were flooded with self-proclaimed experts explaining the economics of popcorn. It almost appeared as if the GST had been imposed not on popcorn, but on popcorn commentators themselves.
Time passed, the headlines changed, and the same platforms suddenly became filled with discussions on ethanol blending, biofuels, automobile engineering, and energy policy. Almost overnight, everyone seemed to become an expert on internal combustion engines, fuel chemistry, and public policy. Some confidently declared that ethanol would destroy every vehicle engine. Others argued that it would ruin Indian agriculture, threaten food security, or merely serve the interests of oil companies and sugar mills. Facts became scarce, conclusions became abundant, and confidence far exceeded understanding.
The problem is not that citizens express opinions. In a democracy, questioning public policy is both a right and a responsibility. The real concern arises when complex national policies are judged on the basis of incomplete information, emotional narratives, viral videos, and half-understood facts rather than careful analysis and evidence.
The Ethanol Blending Programme is one such policy. For many, the verdict was delivered long before the policy itself was understood.
Every Public Policy Has a Context
No government introduces a major policy simply because it appears attractive or politically fashionable. Every significant public policy emerges as a response to a set of economic, social, strategic, or environmental challenges.
The Ethanol Blending Programme was not designed to solve a single problem. It was conceived as an integrated response to multiple structural challenges that India had been facing simultaneously for decades.
India’s ethanol blending in petrol has increased from around 1.5% in 2014-15 to over 12% in 2023-24, and the country has achieved the E20 target before deadline
However, to understand why this policy became necessary, one must first understand the problems it was designed to address.
Challenge One: Balancing Farmers’ Income and Food Inflation
Perhaps no country faces a more delicate policy dilemma than India when it comes to agriculture.
On one hand, millions of farmers deserve remunerative prices for their produce. Agriculture is not merely an economic activity; it remains the primary source of livelihood for a large section of the population. Rising input costs—fertilisers, seeds, labour, irrigation, electricity, and transportation—make fair farm prices essential for sustaining rural incomes.
On the other hand, the Government also carries the responsibility of ensuring affordable food for consumers.
A substantial increase in the Minimum Support Price (MSP) can improve farmers’ incomes, but it may also put upward pressure on food prices under certain conditions. Conversely, keeping MSP increases modest may help contain inflation but can reduce farm profitability.
This is the fundamental policy dilemma that every government faces.
Agricultural policy, therefore, is not merely about supporting farmers. It is equally about controlling inflation, ensuring food security, maintaining fiscal discipline, and protecting consumers. Yet agriculture was only one part of the larger challenge.
Challenge Two: The Structural Crisis of India’s Sugar Industry
India is among the world’s largest producers of sugarcane. To protect farmers, the Government announces a Fair and Remunerative Price (FRP) every year, while several states prescribe an even higher State Advised Price (SAP).
This creates a unique economic situation.Sugar mills must purchase sugarcane at a government-determined price irrespective of market conditions.
However, the selling price of sugar is determined largely by market demand and supply. Whenever sugar production increases significantly, sugar prices tend to fall. The cost of sugarcane, however, does not.
Consequently:
- Sugar mills face severe cash flow constraints.
- Farmers experience delays in receiving payments.
- Bank borrowings increase.
- Sugarcane arrears accumulate into thousands of crores.
The crisis extends far beyond the sugar industry.
It affects farmers, rural employment, banks, state finances, and the broader rural economy.
Recognising this vulnerability, many sugar mills—particularly in Uttar Pradesh and Maharashtra—invested in distilleries to produce ethanol from sugarcane juice and B-heavy molasses. Ethanol provided them with an additional and relatively stable revenue stream, reducing dependence on sugar prices and improving their ability to clear farmers’ dues.
Challenge Three: Limited Markets for Maize Farmers
The challenge was not confined to sugarcane.
For many years, maize in India was used primarily for poultry feed, the starch industry, and a few industrial applications.
This meant that whenever poultry demand weakened or production exceeded expectations, maize farmers struggled to obtain remunerative prices.
A healthy agricultural economy requires diversified demand.
Farmers should have multiple buyers—gnot just government agencies or a single industry. By expanding ethanol production from approved feedstocks, India created an additional industrial market for maize.
Instead of depending solely on traditional demand, maize farmers gained access to a growing biofuel industry. In economic terms, this represented market diversification—a critical element of long-term agricultural resilience.
Challenge Four: Rising Foodgrain Stocks and Storage Costs
India’s food security system relies heavily on government procurement of wheat and rice under MSP.
This system has successfully ensured national food security.
However, success created another challenge.
Large procurement resulted in ever-growing foodgrain stocks.
These stocks had to be:
- stored,
- transported,
- protected,
- maintained,
- and eventually distributed.
All of this involves enormous public expenditure.
Modern silo capacity remained limited, while maintaining excess stocks imposed a significant fiscal burden.
The policy challenge, therefore, was not whether food security should be protected—it certainly should—but how approved surplus grain could be managed more efficiently without compromising national food security.
Challenge Five: India’s Dependence on Imported Crude Oil
Alongside agricultural challenges stood another strategic concern.
India imports approximately 85% of its crude oil requirements.
This dependence has serious economic implications.
Whenever international crude oil prices rise:
- India’s import bill increases.
- Foreign exchange outflow expands.
- The current account deficit widens.
- Inflationary pressures intensify.
- The economy becomes more vulnerable to geopolitical shocks.
Energy security, therefore, is not merely an issue of fuel availability.
It is a matter of economic sovereignty and national resilience.
One of the objectives of ethanol blending has been to reduce petroleum imports and conserve foreign exchange while promoting domestically produced renewable fuel.
One Policy, Multiple Solutions
At first glance, these challenges appear unrelated.
- Farmers needed better incomes.
- Sugar mills needed financial stability.
- Maize farmers required additional markets.
- Foodgrain management required greater efficiency.
- India needed stronger energy security.
Traditionally, one might expect five separate policies to address five different problems.
Instead, policymakers attempted to design a single integrated solution.
The Ethanol Blending Programme emerged from this broader vision.
Ethanol Blending: Far More Than a Fuel Policy
The objective of ethanol blending was never limited to replacing a portion of imported petrol.
Its broader goals include:
- Creating additional markets for agricultural produce.
- Providing an alternative revenue stream for sugar mills.
- Expanding demand for maize and other approved feedstocks.
- Strengthening rural incomes.
- Reducing crude oil imports.
- Conserving valuable foreign exchange.
- Improving energy security.
- Promoting cleaner-burning renewable fuels.
Viewed through this lens, ethanol blending is not merely an energy policy.
It is simultaneously:
- an agricultural policy,
- an industrial policy,
- a rural development strategy,
- an energy security initiative,
- and an instrument of economic self-reliance.
Should the Policy Be Criticised? Absolutely.
Every public policy deserves scrutiny.
Questions regarding water use, crop diversification, food security, environmental sustainability, engine compatibility, and the long-term economics of ethanol production are entirely legitimate.
Conclusion: Understand the Problem Before Judging the Solution
The debate on ethanol blending is necessary.
However, the discussion should not begin with the question:
“Why is ethanol being mixed with petrol?”
It should begin with a more fundamental one:
“What problems was India trying to solve through this policy?”
Only after understanding those structural challenges can one fairly assess whether the policy has succeeded, where it has fallen short, and what improvements are still required.
Good public policy is rarely perfect.
It is an exercise in balancing competing priorities.
The Ethanol Blending Programme should therefore be judged not through the noise of headlines or the certainty of social media experts, but through evidence, economics, and India’s long-term national interest.
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