El Niño poses challenge to India’s E20 ethanol target
India’s ethanol blending rate could fall to around 15% in ESY 2026-27 as El Niño-related weather risks threaten maize, rice and other feedstock supplies. The Centre excluded sugarcane-based ethanol from procurement, while higher crop prices and competing food and industrial demand add pressure on supplies.
India’s ethanol blending programme is facing fresh challenges as El Niño-related weather disruptions threaten agricultural production and the availability of feedstocks. Despite achieving the 20% ethanol blending target (E20) ahead of schedule, the country may struggle to maintain the mandated level during the 2026-27 supply year, with industry sources indicating that the blending rate could fall to around 15%, Financial Express reported.
According to a Reuters report, limited availability of feedstocks could affect ethanol supplies during the supply year that began in November 2026. The development comes after the Centre directed oil marketing companies (OMCs) to stop diverting sugarcane-based feedstocks for ethanol production in ESY 2026-27. The latest ethanol procurement tender excluded ethanol produced from sugarcane juice, sugar syrup and B-heavy molasses.
The restrictions come amid concerns over agricultural production following weak monsoon conditions and the possibility of an intense El Niño. Rising prices of maize, sugar and rice have added to concerns over feedstock availability. The developments could put pressure on India’s efforts to reduce crude oil imports through ethanol blending.
Coal generation rises as hydropower output declines
The impact of adverse weather conditions is also becoming visible in India’s electricity sector. Lower hydropower generation and increasing electricity demand have pushed the country to depend more heavily on coal-fired power plants.
According to Reuters calculations based on power generation data, coal-fired electricity generation increased 25.7% year-on-year in October. Coal’s share in total electricity generation rose from 66.03% in September to 71.7% in October.
Hydropower generation declined sharply due to below-normal rainfall. Reuters, citing Grid India data, reported a 26% decline in hydropower generation, marking the steepest fall since February 2024. Government data also indicated that generation had dropped 20% compared with the corresponding period last year.
India’s renewable energy capacity has crossed 300 GW, but inadequate battery storage continues to limit the availability of solar and wind power after sunset. Power shortages reportedly reached 560 million kWh in September, while several States sought additional electricity allocation to prevent supply disruptions.
Ethanol programme delivers substantial foreign exchange savings
India launched its ethanol blending programme in 2003 to reduce dependence on imported crude oil, improve energy security and provide additional income opportunities to farmers.
The country achieved 20% ethanol blending in petrol well ahead of its original 2030 deadline. The programme has generated significant economic benefits. According to a Press Information Bureau release issued in July, India has saved more than ₹1.9 lakh crore in foreign exchange since 2014 through ethanol blending. Farmers have also received additional earnings of around ₹1.6 lakh crore.
The government has also introduced higher ethanol blends, including E85 and E100, for selected vehicles as part of its efforts to expand the use of biofuels.
However, maintaining the blending target could become difficult if agricultural production and feedstock availability remain under pressure.
El Niño raises concerns over agricultural production
The possibility of a strong El Niño has increased concerns over India’s agricultural output. Several regions have experienced drought-like conditions following weak monsoon rainfall, raising concerns over the production of maize, sugarcane and other agricultural commodities.
The India Meteorological Department has indicated the possibility of very strong El Niño conditions during November and December 2026.
The Centre has revised its foodgrain production target for 2026-27 to 373.93 million tonnes, compared with the previous year’s target of 362.60 million tonnes. The revised target includes 177.72 million tonnes from the rabi season.
The weather-related uncertainty has implications for both food security and the biofuel industry. Reduced agricultural output could increase competition between food consumption, animal feed and industrial uses of agricultural commodities.
Food security takes priority over sugar-based ethanol
The Centre’s decision to exclude sugar-based feedstocks from ethanol procurement during ESY 2026-27 reflects concerns over sugar availability and domestic consumption requirements.
In October, BPCL floated a tender for the procurement of approximately 11 billion litres of ethanol for the November 2026-October 2027 supply period. The tender primarily covers grain-based feedstocks, including maize, broken rice and surplus rice.
OMCs reportedly received bids for 19.32 billion litres against the requirement, with maize accounting for a significant share of the offers.
However, grain-based ethanol manufacturers have raised concerns over procurement prices and allocation norms. They have urged the Centre to reconsider the pricing structure, stating that recent changes could affect the financial viability of distilleries.
The procurement price for maize-based ethanol has been reduced from ₹71.86 to ₹68.86 per litre. Grain Ethanol Manufacturers’ Association president CK Jain said the reduction could affect distillery profitability and farmers’ incomes.
He also expressed concern over the allocation of rice-based feedstocks, particularly surplus foodgrain supplied by the Food Corporation of India and damaged foodgrains. According to him, the existing procurement structure could reduce the competitiveness of maize-based ethanol production.
Higher energy demand could increase India’s import burden
Weather disruptions are also expected to affect India’s overall energy requirements. Weak rainfall has increased the need for irrigation, prompting farmers to depend more heavily on diesel-powered pumps.
Provisional data from the Petroleum Planning and Analysis Cell indicated that diesel consumption increased 11.7% year-on-year in October 2026.
At the same time, higher temperatures could increase electricity demand for cooling, while reduced hydropower and wind generation may require additional thermal power generation.
A July assessment by the Centre for Research on Energy and Clean Air (CREA) estimated that a strong El Niño during 2026-27 could increase India’s fossil-fuel-based electricity generation requirement by 17.7 TWh. The additional demand could rise further under a more severe weather scenario.
CREA estimated that meeting the electricity shortfall primarily through coal-fired generation could result in an additional 17 million tonnes of carbon dioxide emissions.
For India, the combination of uncertain agricultural output, restrictions on sugar-based ethanol production and higher electricity and fuel demand presents a challenge to its energy security objectives.
The developments highlight the need to balance food security, sugar availability, farmers’ interests and the country’s ethanol blending ambitions while ensuring adequate feedstock supplies for the biofuel industry.
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Source : ChiniMandi
