India's Ethanol Push Creates Double Inflation Whammy on Food Prices

India's push to blend ethanol into petrol is causing food prices to rise, particularly for sugar and maize. The country has set a target of blending 20% of its fuel with ethanol by 2025-26, five years ahead of schedule. This decision aims to reduce dependence on imported crude oil and provide an additional income source for farmers and sugar mills.

However, the same crops being diverted to make ethanol are also needed to feed people and animals. When there's a shortage of sugarcane or maize, what gets priority: food or fuel? The impact is already being felt in grocery prices, but not in cheaper petrol at the pump.

The government has enough sugar in reserve to cover its needs until October, but farmers sold their sugarcane months before retail prices began climbing. Ethanol production relies on agriculture, and the demand for crops used in ethanol production has increased significantly.