Homeenergy News

Using ethanol as fuel can undermine India's food security, here's how

Using ethanol as fuel can undermine India's food security, here's how

Using ethanol as fuel can undermine India's food security, here's how
Profile image

By CNBCTV18.com Oct 6, 2021 4:37 PM IST (Updated)

In order to meet the country's goal of 20 percent ethanol blending by 2025, India will be diverting 6 million tonnes of sugar to ethanol production. But if prices of sugar increase due to a new bull market for its prices, farmers may soon be competing for land for growing food crops and growing sugar. Large scale shifts from growing food crops to sugar may threaten the food security of India.

India is aiming to achieve blending 20 percent of its fuel with ethanol by 2025 as part of its effort for cleaner energy. The ethanol will be produced by processing sugar. It is estimated that 10 billion litres of ethanol will be required by 2025 to achieve 20 percent blending ratios, triple the current output of ethanol.

Recommended Articles

View All

The move is expected to have multiple benefits — reduced emissions, less air pollution and reduced oil import expenditure among other things. However, using domestic sugar to produce ethanol may end up hurting the food security of the nation.
Economy of scale
To meet the target of producing 10 billion litres of ethanol, a large proportion of sugar will have to be diverted for processing. The government is looking to divert nearly 6 million tonnes of sugar annually by 2025, said the Ministry of Consumer Affairs, Food and Public Distribution.
The amount of sugar to be diverted is equivalent to India’s total sugar exports in a year.
While the shift to 20 percent ethanol was supposed to happen by 2030, Prime Minister Narendra Modi shifted the timeline up by five years. A shorter time frame to achieve the goal increases the risk of shortages in sugar supply in the near term, as large quantities of sugar are diverted for fuel instead of consumption.
Food Inflation
The basic laws of the economy state if demand outstrips supply then the price of the commodity increases, in most cases. Possible shortages in sugar supply, especially in a country where crops are heavily dependent on the monsoon, can quickly lead to an increase in the prices of sugar. With climate change triggering more frequent erratic weather events, the possibility of a bad or poor crop of sugarcane remains a threat.
As sugar prices increase, especially as prices are already are at their highest due to bad weather in Brazil which is the largest producer of sugar, more farmers may be tempted to leave their usual crops and instead try to grow the more lucrative sugarcane.
Such a shift may cause a shortage of other staples due to fewer farmers growing those crops. The competition for land can seriously threaten the national food supply chain.
Food inflation is already at a decade high at a global level, and a further increase in food item prices will not only cause inflation to rise but seriously threaten the food security of India.
India remains one of the worst nations in terms of food safety. The Global Hunger Index found that India ranked 94th out of 107 countries in terms of food safety in 2020. The country was indexed as having a score of 27.2, a level of hunger that is serious.
An increase in food item prices could stand to push thousands if not millions further into hunger scarcity as a result.
Modelled examples 
While India’s ethanol dreams may threaten food security for millions of Indians, the likelihood of that happening is lower than many would imagine. Brazil also shifted to a sugar-excess ethanol processing solution to deal with the glut in sugar production. The country’s fuel imports have gone down and sugarcane farmers now have much more stable incomes.
While research warns against growing sugarcane explicitly meant to turn it into biofuel, using excess production of a food item to turn into fuel has less than the estimated impact on food commodity prices. Several studies estimated it to have a bigger impact than it actually did.
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!

Most Read

Market Movers

View All
Top GainersTop Losers