If you need to understand how the ‘law of unintended consequences’ works, India’s policy-making landscape is a good place to start. Our policies on ethanol blending provide a classic case study. The policy’s big-picture objective, reducing our import dependence for fuel, is well-intentioned. And the emerging public opposition to what higher blending does to the life of car engines also seems fair. But it is the second-order effects that no one seems to be talking about. Tanvi Deshpande, writing for iSignal, traces one of them.
The paradox is that this is happening in a year of plenty. “Despite a record maize production last year,” she writes, “India’s poultry farmers are contending with higher retail prices of the poultry staple due to increasing demand for ethanol blending. With a decline in sowing and deficient rainfall this year, experts say this is likely to get worse.”
The commercial consequences of more maize going into ethanol production are unforgiving: “Maize was available to poultry farmers for Rs 12-14 per kg around the year 2019 but it now sells for Rs 27-28 per kg in the retail market… farmers maintaining egg-layer and broiler poultry are both facing a crisis. They have to buy feed at these high prices and either pass on the cost to the consumer or bear the losses.” Sujit Patil, a poultry farmer from Sangli who once bought maize at about Rs 12 a kg, now watches it touch Rs 32 in the off season. “Back when maize was Rs 12 and soya was around Rs 25-26, the cost to produce a single egg was Rs 2.50-2.60. Now, it costs the farmer Rs 4-4.50. So the egg which we used to get in the market for Rs 5 now goes for Rs 8-10,” he says.
The Ethanol Blended Petrol programme began in 2003, when “average blending remained in the 0.1% to 1.5% range up to 2013-14”; India then hit its 20% blending target in 2025-26 and, the government said, “saved Rs 1.9 lakh crore in foreign exchange spent on importing fossil fuels since 2014-15.” The twist is where that ethanol now comes from. “Currently, nearly three-fourths of the ethanol produced in the country comes from grains, particularly maize,” Deshpande writes, with maize’s share climbing “from 0% in Ethanol Supply Year (ESY) 2021-22 to around 37% in ESY 2025-26… This amounts to around 4.8 billion litres of maize-based ethanol in the same year, rising about 12.6 million tonnes of maize.” Sugar, the original feedstock, had stepped back: “Restrictions on sugar diversion following consecutive monsoon disruptions limited the availability of cane juice and molasses,” the All India Distillers’ Association noted, so “to maintain blending targets, policy incentives were extended to grain-based ethanol, including higher procurement prices.” The irony is that the maize route is dearer – “Rs 71.86 per litre in 2025-26… than other feedstock, rising from Rs 52.92 in 2021-22” – and even a record 55-million-tonne harvest, 11 million more than the year before, has left the crop “under strain from the competing demands for human consumption, poultry and livestock feed, and the rising demand from the ethanol industry.”
The people absorbing that strain sit at the bottom of the pecking order. “Because maize got diverted for ethanol, its availability for poultry reduced and rate increased,” says Anil Phadke, a poultry farmer from Nashik. “Maize prices five years ago used to be Rs 14-15 per kg. Now they are Rs 25 to Rs 28 per kg. The inflation rate is much higher compared to other commodities.” If the squeeze continues, he reckons chicken could climb from Rs 200 a kg to Rs 400-500, and “eggs that are Rs 10 per piece will become Rs 20 or 25. If India wants to feed its large population, our cultivable land has to increase but it is decreasing.” The feed bill cannot simply be passed to the customer. “If ethanol continues taking maize from the market, maize prices can go up to Rs 30 next year, the highest ever,” says Sanjay Nalgirkar of the Maharashtra Poultry Farmers and Breeders Association. “The cost of eggs has increased around 40%… We are facing around 20% losses. Traders can choose to wait to sell (eggs) but we cannot. We have to sell at whatever the price.” Ranpal Dhanda, who heads the Poultry Federation of India, puts the bind plainly: “The moment the price increases even slightly, there is uproar. So, we cannot increase prices. Then what should we do?” The government’s reassurance, delivered to Parliament in December 2025, was that “the quantity of maize is sufficient to cater the demand of ethanol production, poultry and other purposes,” and that the industry could switch to “other domestically available ingredients such as Rice bran, Broken Rice, Bajra and Wheat offal” – except, Patil notes, de-oiled rice bran has itself jumped from Rs 7-8 a kg in 2019 to Rs 22-23 now.
Even the distilleries are uneasy. “Industry estimates for 2025-26 indicate a potential maize shortfall of 17 million tonnes, prompting calls for duty-free imports and alternative feed options. India has already shifted from being a net exporter of maize to a net importer to manage this gap,” AIDA noted, and the country allows only “up to 0.5 million tonnes of corn imports annually at 15% import duty,” with a 50% duty beyond that.
The deeper worry, in a section Deshpande titles “A corn job,” is that the arithmetic of the whole exercise may not add up. Land is the binding constraint. “India has limited land. So where will maize grow? It has to substitute something else,” says R. Ramakumar of the Tata Institute of Social Sciences. “Incentives to convert from rice to maize are limited but incentives to convert from oilseeds or pulses to maize are much higher.” That matters because India already “spends more than $20 billion a year importing edible oil, and that bill is rising”; crowding out oilseeds to grow fuel-maize risks swapping one import bill for another. There is a blunter efficiency point as well: “you need 187 hectares worth of maize-derived ethanol to match the annual travel distance of an EV recharged from one hectare of solar energy,” Deshpande writes, citing a 2022 report by the Institute for Energy Economics and Financial Analysis. Ramakumar’s verdict is withering. “Maize supply simply could not catch up with the increasing demand which means that we have a maize shortage now and it is affecting everybody,” he says. “If you had planned for an increase in the demand for ethanol, did you plan for the increase in supply also? What happens to your overall food security concerns including pulses, oilseeds, etc.? Have you done a cost-benefit analysis? If the import bill from fossil fuels is falling and the import bill from oilseeds is rising, what is the net gain? Ultimately, distilleries are benefiting more than the maize farmers. They are the winners here.”
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