India&rsquo;s ambitious ethanol blending programme has sparked a growing trade dispute with the United States. At stake is not just access to a booming fuel market, but also the future of India&rsquo;s farmers, energy security, and global trade dynamics.
India&rsquo;s Ethanol Blending Push India&rsquo;s Ethanol Blended Petrol (EBP) programme is designed to reduce dependency on crude oil imports and increase farmer income. The government aims to blend up to 20% ethanol with petrol by 2025.
Ethanol in India is primarily produced from two sources: molasses (a byproduct of sugar production) and surplus food grains such as rice, maize, and wheat. Recently, innovations have introduced non-food sources like whey (from dairy processing) to diversify feedstocks.
Rising Demand, But Supply Falls Short To meet the 20% blending target, India needs approximately 10.16 billion litres of ethanol annually. However, in FY24, the country managed to produce just over 5 billion litres for blending.
While India&rsquo;s total ethanol production capacity stands at about 13 billion litres as of 2024, only around 42% of it is currently allocated for fuel blending. Expanding this to full capacity will require significant investment and policy reforms.
Why the US Wants In The United States is the world&rsquo;s largest ethanol producer, primarily using corn. In 2024, the US produced over 68 billion litres and exported $441 million worth of ethanol globally.
American ethanol producers view India as a major growth market. However, Indian regulations prohibit ethanol imports for fuel blending. Imports are only permitted for industrial or pharmaceutical purposes under restricted "actual user" licenses.
India&rsquo;s Protectionist Stand India&rsquo;s resistance to importing fuel-use ethanol stems from the need to protect domestic producers and ensure farmer welfare. Sugar mills and grain-based distilleries in Maharashtra, Gujarat, and Uttar Pradesh have heavily invested in ethanol infrastructure.
Industry leaders caution that allowing cheaper US ethanol would saturate the market, damage local production, and reduce farmers&rsquo; incomes. The government views the EBP programme as critical to rural development and national energy security.
A Standoff in Trade Talks For the US, ethanol access is a key ask in ongoing trade negotiations. However, India has held its ground, stressing that opening the market could compromise its self-sufficiency goals.
The ethanol issue has become a flashpoint in bilateral discussions, alongside disputes on agriculture, digital trade, and pharmaceuticals.
Global Ethanol Market Dynamics Brazil, the world&rsquo;s second-largest ethanol producer, uses sugarcane as its primary input and exports ethanol to both the US and Asia. Argentina is also exploring opportunities to export biofuels to meet India's growing energy demands.
Globally, the ethanol market remains competitive and volatile, shaped by shifts in policy, demand, and climate-related trends.
The Road Ahead India aims to scale up ethanol production to about 17 billion litres by 2028. Bridging the current supply gap will require diversified feedstock, expanded distillery capacity, and incentivized pricing.
The ethanol dispute between India and the US underscores the tension between trade liberalization and domestic policy priorities. While India is currently backing its rural economy, changing global pressures may eventually push for policy adjustments.

India-US Face Off Over Ethanol Trade Access

India's ethanol policy draws fire from US amid fuel import curbs, farm interests, and trade tensions

India-US Face Off Over Ethanol Trade Access

India's ethanol policy draws fire from US amid fuel import curbs, farm interests, and trade tensions

July 14, 2025 | 01:11 IST