India's Maize Bind: Ethanol Prices Soar as Crude Oil Costs Fall

India's policy to reduce its dependence on imported crude oil has led to an unexpected consequence: the country is now relying heavily on maize imports, a crop it used to export until recently.

The government buys ethanol made from maize at a fixed ₹71.86 per litre, which is higher than the cost of crude oil, even with the impact of the West Asia crisis. A litre of crude oil costs around ₹55, while the Ministry of Petroleum and Natural Gas has conceded that blending ethanol into petrol becomes more expensive when crude prices near $70 a barrel.

The shift to maize was part of a deliberate strategy outlined in the 'Roadmap for Ethanol Blending in India 2020-25', which aimed to reduce the country's reliance on sugarcane, the traditional source of ethanol. However, Indian maize yields are lower than those of sugarcane, and the increasing demand for ethanol has led to a shortage in domestic supplies.

India became a net importer of maize for the first time in decades in 2024, buying around 0.9 million tonnes worth $220 million, mainly from Myanmar and Ukraine. The poultry and animal-feed industry is also competing with distilleries for the same grain, pushing feed users to buy abroad to cover the gap.