Can maize maintain its newfound supremacy in ethanol production?

Though grains have overtaken sugarcane as the primary feedstock in making ethanol in the 2023-24 supply year, whether they will continue to be so depends on whether India's average yield of crops such as maize rises quickly. The rising demand for maize and broken grains from the ethanol players has put competing sectors such as poultry and feedstock under stress, as they are already feeling the pinch of a price rise due to the demand jump.

Some reports say the maize-based industry has demanded immediate imports of 5 million tonnes of duty-free imports to tide over the supply crunch.

Not only that, even grain-based ethanol makers are feeling the pressure of a spike in maize prices as their ethanol procurement price of Rs 72 per litre was fixed when maize MSP (minimum support price) was Rs 2,090 per quintal.

The current maize MSP for the 2024-25 kharif season is Rs 2,225 per quintal.

Even, the procurement price of ethanol produced from damaged food grains has not kept pace with the rate at which its price has picked up in the open market.

Upstaging sugarcane

In the ongoing ethanol Supply Year of 2023-24 (ESY24), which ends in October, grains (mainly maize and damaged food grains) have taken over sugarcane-based molasses as the main feedstock for producing ethanol to keep the blending programme running.

As per the latest trade data, till July 14, 2024, Oil Marketing Companies (OMCs) have received 4.26 billion litres of ethanol. Out of this, grain-based sources accounted for 54 per cent, at 2.29 billion litres, while the rest came from sugarcane-based sources.

Among all sources from which ethanol has been produced in the 2023-24 supply year, maize, which is part of the broader grains basket, accounted for the largest share with 1.49 billion litres.

The biggest reason why the tide has shifted from sugarcane to grains in the last few months of ESY24 is the clampdown on the production of ethanol from B-heavy molasses and sugarcane juice since late 2023. The Centre, to keep its blending programme up and running, has incentivised maize much more than sugarcane this year, making distilleries go for ethanol from maize and grains in a big way.

Ethanol produced from maize now commands a price of almost Rs 72 per litre in ESY24, while its nearest competitor from sugarcane, which is C-heavy molasses, is at Rs 56.28 per litre, even after it was raised mid-way in 2023-24 by almost Rs 7 a litre.

Industry players say that till June 24, out of the roughly 15.03 billion litres of ethanol production capacity already created in the country, 9.15 billion litres, about 61 per cent, is from sugarcane-based sources (this includes dual-feed distilleries that use both cane and grains) and rest by grains-based sources.

Way ahead and challenges

The big question is, can grains and within it maize maintain its newfound supremacy in ethanol production?

Trade sources say at least in the next ESY (2024-25), grains will remain the dominant source of ethanol production in the country. Out of the estimated 7.92 billion litres of ethanol to be supplied to OMCs in 2024-25 supply year, 4.23 billion litres, about 53 per cent, are likely to come from grains and the rest from sugarcane-based sources. 

Within grains, maize will continue to be the dominant feedstock, contributing 2.50 billion litres of ethanol. Rating agency CRISIL recently predicted it might rise to as much as 6 billion litres from grains in 2024-25.

Simply put, the situation that occurred in ESY24 will continue to remain almost the same in ESY25 as well.

However, some in the sugar industry think otherwise. Their analysis is that as soon as the Centre lifts the curbs on production of ethanol from sugarcane juice and B-heavy molasses, the share of sugarcane in total ethanol will come back to the old levels. Already, the industry body, the Indian Sugar and Bio-Energy Manufacturers Association (ISMA) has dashed off a letter to the food secretary demanding the lifting of these curbs.

ISMA in its letter said the restrictions imposed in December 2023 have significantly impacted the sugar industry's financial stability. It added that with India expected to have a sugar surplus of 9.1 million tonnes by the end of the 2023-24 season, which will end in September, amid good monsoon conditions, the country should not see any sugar shortage in 2024-25.

Maze of challenges

Beyond the immediate few years, the road ahead for maize is riddled with challenges. And yield and production are the biggest of them.

Trade and industry players say India's average maize yield is around 3.5 tonnes per hectare, lower than the 5 tonnes per hectare in Pakistan and still lower than the global average of around 6 tonnes.

Within India, too, there is wide variance in per-hectare yield. In Bihar, which is one of the main maize-producing states, the yield in some farms comes as high as 8 to 12 tonnes per hectare.

“India has the potential to raise its average maize yield to 5 or 6 tonnes per hectare. As soon as that happens, the country’s total production will jump from the current 34 to 35 million tonnes to around 50 million tonnes. This extra 15 million tonnes of maize will give an ethanol production of around 5.70 billion litres, which will be good enough for blending and won’t create a shortage for anyone,” Abinash Verma, former Director General of the Indian Sugar Mills Association told Business Standard.

The yield improvement can be done within two years by focusing on hybrids and also on the rabi maize crop, which gives a higher yield than Kharif, says Verma. It is here that the role of bodies such as the Indian Institute of Maize Research (IIMR), under the Indian Council for Agricultural Research, comes into focus.

The government aims to raise maize production by 10 million tonnes over the next five years. The IIMR in a recent statement said it started a project to raise the productivity and production of maize in 15 catchment areas of ethanol industries in 78 districts spread across 15 states.

The project involves working on high-yield hybrid maize varieties (those that give an yield of more than 6.5 tonnes per hectare in kharif, or summer months, and more than 10 tonnes per hectare in the rabi season). In the pipeline are varieties of waxy maize hybrids with better ethanol recovery (more than 40 per cent) and maize hybrids with high starch (more than 65 per cent).

IIMR also promotes effective nutrients and weed management practices for better maize cultivation.

Efforts like this, in collaboration with state governments, private seed companies, and others, can give the additional 12 to 15 million tonnes of maize over the next few years needed to tide over any possible crisis for user industries.