Is India's ethanol push really helping farmers? What government data says

Official data shows maize prices remained below MSP despite the ethanol push, raising questions over who has benefited from the policy.

In Short

• Agriculture Ministry figures showed mandi rates lagging support prices for months
• In November 2025, maize posted the steepest gap below support prices
• Cheaper FCI rice supplies let distilleries cut maize purchases from mandis

Over the past few months, ethanol has become one of the most debated subjects in India's political and economic circles. Policymakers, industry voices and some farmer organisations have projected ethanol as a game changer, arguing that Indian farmers are no longer just food producers but are also powering the country's energy transition.

The claim is that ethanol has significantly improved farmers' incomes. But do official government figures support that narrative? Or are farmers being used to support an industry-led model while receiving little of the financial gains?

The answers lie in data from the Union Agriculture Ministry and the government's Agmarknet portal.

THE MAIZE STORY

The biggest promise of India's ethanol policy was made to maize growers. Farmers were encouraged to increase production with the assurance that rising ethanol demand would fetch them better prices.

Production increased, but market prices told a different story.

Agriculture Ministry data shows that from March 2025 to August 2026, the average mandi price of maize remained below the Minimum Support Price (MSP) every single month. Selling below MSP effectively meant farmers were forced to sell at a loss.

In March 2025, the MSP for maize stood at Rs 2,225 per quintal, while the average mandi price was Rs 2,176.61.

November 2025 marked the sharpest decline. Although the MSP had risen to Rs 2,400 per quintal, the average mandi price dropped to Rs 1,634.74, leaving farmers with a gap of more than Rs 765 per quintal.

Even in August 2026, maize continued to trade below MSP, with the average price at Rs 2,008.69 per quintal -- around Rs 391 below the support price.

IF ETHANOL DEMAND IS SO HIGH, WHY ARE MAIZE PRICES LOW?

The obvious question is: if ethanol demand is as strong as projected, why have maize prices remained below MSP for nearly 18 months?

One reason lies in government policy.

To reduce input costs for ethanol producers, the Food Corporation of India (FCI) supplied rice to ethanol companies at Rs 23.20 per kilogram. This was lower than the MSP of Rs 24.41 per kilogram at which the government had procured paddy from farmers.

With access to cheaper government-supplied rice, distilleries reduced purchases of maize from mandis. At the same time, maize imports were eased, increasing supply further.

The result was that industry costs remained protected while maize farmers continued to receive depressed market prices.

SUGARCANE FARMERS' CONCERNS

Sugarcane farmers have also questioned whether they are benefiting fairly from the ethanol programme.

Sugar mills now produce ethanol from sugarcane juice and B-heavy molasses before selling it to oil marketing companies. However, the formula used to determine sugarcane prices continues to depend only on cane weight and sugar recovery.

There is no provision that allows farmers to share in the revenue generated from ethanol production.

As a result, sugarcane growers have been demanding an "ethanol premium" or bonus, arguing that if additional profits are being earned from ethanol produced using their crop, they should receive a share of those earnings.

The government's position has been that ethanol sales improve mills' cash flow, enabling faster payments to farmers.

That raises another question: if timely payment is already a legal obligation of sugar mills, why should it be presented as an additional benefit?

QUESTIONS OVER THE POLICY

The ethanol policy raises several questions.

If ethanol has transformed maize farming, why did farmers continue to receive prices well below MSP, including just Rs 1,634.74 per quintal in November 2025?

Ethanol producers receive assured prices from oil marketing companies. Why is there no similar legal guarantee for farmers supplying the raw material?

MSP revisions existed before the ethanol programme and continue today. Farmers are not receiving any additional payment above MSP because their crops are being used for ethanol production.

If the policy is genuinely farmer-centric, why has no profit-sharing mechanism been introduced under which a fixed share of ethanol revenue is transferred directly to farmers?

THE LARGER PICTURE

The Agriculture Ministry's data indicates that the benefits of the current ethanol policy are not being shared equally.

Farmers bear the production risks, while ethanol companies receive the financial gains. Maize growers responded to government policy by increasing production, yet continued to receive prices below MSP as subsidised FCI rice was supplied to ethanol producers and maize imports were relaxed.

Unless the government guarantees procurement of maize at MSP and incorporates ethanol revenue into sugarcane pricing through a bonus or profit-sharing mechanism, the promise that ethanol has transformed farmers' livelihoods will remain open to question.

- Ends