Ethanol boom, but where are farmers' gains? Ministry data shows maize prices below MSP
Ethanol boom, but where are farmers' gains? Ministry data shows maize prices below MSP
The government's ethanol policy encouraged farmers to expand maize cultivation by projecting strong demand from the biofuel industry. Farmers responded with higher production, but market prices failed to keep pace
Om Prakash
- Aug 4, 2026,
- Updated Aug 4, 2026 5:35 PM IST
The government's ethanol programme has been promoted as a way to turn India's farmers from "annadata" (food providers) into "urjadata" (energy providers). But official data from the Union Agriculture Ministry and Agmarknet is raising questions over whether the biggest gains have reached farmers.
The data shows that despite a strong policy push for maize-based ethanol production, the average mandi price of maize remained below the Minimum Support Price (MSP) every month between March 2025 and August 2026.
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The government's ethanol policy encouraged farmers to expand maize cultivation by projecting strong demand from the biofuel industry. Farmers responded with higher production, but market prices failed to keep pace.
Don't Miss: SIAM flags high chloride levels in E20 fuel, warns of permanent engine part damage, govt responds
WHAT THE DATA SHOWS
According to the Agriculture Ministry's report, there was not a single month between March 2025 and August 2026 when the average mandi price of maize even matched the Minimum Support Price (MSP).
In other words, maize farmers had to sell their crop below MSP throughout the entire 18-month period. Selling below MSP means farmers are forced to sell at a loss.
Maize farmers did not receive average mandi prices equal to MSP during the 18 months from March 2025 to August 2026. In March 2025, when the MSP stood at ₹2,225 per quintal, the average mandi price was ₹2,176.61.
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The gap widened sharply in November 2025. The MSP was ₹2,400 per quintal, but the average mandi price fell to just ₹1,634.74. Farmers suffered a loss of about ₹765 per quintal.
The trend has continued. In August 2026, average maize prices stood at ₹2,008.69 per quintal, around ₹391 below MSP, according to the data.
Don't Miss: BT Explainer | If ethanol costs ₹71/litre, why is the government blending it with petrol?
WHY ARE PRICES STILL WEAK?
The contradiction lies in how ethanol producers source their raw material.
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To lower production costs, the government supplied rice from Food Corporation of India (FCI) stocks to ethanol companies at ₹23.20 per kg, lower than the MSP procurement price of paddy at ₹24.41 per kg.
As a result, distilleries had less reason to buy maize from farmers. Easing restrictions on maize imports further weakened demand for domestic maize.
SUGARCANE FARMERS SEEK A SHARE
The debate extends beyond maize.
Sugar mills are increasingly producing ethanol from sugarcane juice and B-heavy molasses, creating an additional source of revenue. However, sugarcane growers do not receive any direct share of these earnings.
Sugarcane prices are still determined solely by sugar recovery. The government's pricing formula does not include the additional revenue that sugar mills earn from ethanol. Whether a mill uses sugarcane to produce sugar or directly converts it into ethanol, farmers are paid only on the basis of the quantity of cane supplied and its sugar recovery.
That is why sugarcane farmers have been demanding an "ethanol premium" or an additional bonus. They argue that if mills are earning extra revenue by producing ethanol from their crop, farmers should also receive a share of those additional profits.
Sugarcane farmers are demanding a share in the earnings from every litre of ethanol produced, but the government has so far ignored this demand.
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The government's only argument is that ethanol production improves cash flow for sugar mills, allowing them to clear farmers' payments faster.
But the question is - is receiving timely payment a legal right of farmers or a favour being granted to them? Why are the additional profits generated from ethanol going only into the pockets of mill owners? When will farmers get their rightful share in these gains?
WHO GETS PRICE PROTECTION?
Ethanol producers receive assured prices from oil marketing companies, helping secure their returns.
Maize farmers, however, do not have a comparable legal guarantee that their produce will fetch MSP in the market. This has created a system in which companies have greater certainty over returns than the farmers supplying the raw material.
The government's ethanol programme has been promoted as a way to turn India's farmers from "annadata" (food providers) into "urjadata" (energy providers). But official data from the Union Agriculture Ministry and Agmarknet is raising questions over whether the biggest gains have reached farmers.
The data shows that despite a strong policy push for maize-based ethanol production, the average mandi price of maize remained below the Minimum Support Price (MSP) every month between March 2025 and August 2026.
Advertisement
The government's ethanol policy encouraged farmers to expand maize cultivation by projecting strong demand from the biofuel industry. Farmers responded with higher production, but market prices failed to keep pace.
Don't Miss: SIAM flags high chloride levels in E20 fuel, warns of permanent engine part damage, govt responds
WHAT THE DATA SHOWS
According to the Agriculture Ministry's report, there was not a single month between March 2025 and August 2026 when the average mandi price of maize even matched the Minimum Support Price (MSP).
In other words, maize farmers had to sell their crop below MSP throughout the entire 18-month period. Selling below MSP means farmers are forced to sell at a loss.
Maize farmers did not receive average mandi prices equal to MSP during the 18 months from March 2025 to August 2026. In March 2025, when the MSP stood at ₹2,225 per quintal, the average mandi price was ₹2,176.61.
Advertisement
The gap widened sharply in November 2025. The MSP was ₹2,400 per quintal, but the average mandi price fell to just ₹1,634.74. Farmers suffered a loss of about ₹765 per quintal.
The trend has continued. In August 2026, average maize prices stood at ₹2,008.69 per quintal, around ₹391 below MSP, according to the data.
Don't Miss: BT Explainer | If ethanol costs ₹71/litre, why is the government blending it with petrol?
WHY ARE PRICES STILL WEAK?
The contradiction lies in how ethanol producers source their raw material.
Advertisement
To lower production costs, the government supplied rice from Food Corporation of India (FCI) stocks to ethanol companies at ₹23.20 per kg, lower than the MSP procurement price of paddy at ₹24.41 per kg.
As a result, distilleries had less reason to buy maize from farmers. Easing restrictions on maize imports further weakened demand for domestic maize.
SUGARCANE FARMERS SEEK A SHARE
The debate extends beyond maize.
Sugar mills are increasingly producing ethanol from sugarcane juice and B-heavy molasses, creating an additional source of revenue. However, sugarcane growers do not receive any direct share of these earnings.
Sugarcane prices are still determined solely by sugar recovery. The government's pricing formula does not include the additional revenue that sugar mills earn from ethanol. Whether a mill uses sugarcane to produce sugar or directly converts it into ethanol, farmers are paid only on the basis of the quantity of cane supplied and its sugar recovery.
That is why sugarcane farmers have been demanding an "ethanol premium" or an additional bonus. They argue that if mills are earning extra revenue by producing ethanol from their crop, farmers should also receive a share of those additional profits.
Sugarcane farmers are demanding a share in the earnings from every litre of ethanol produced, but the government has so far ignored this demand.
Advertisement
The government's only argument is that ethanol production improves cash flow for sugar mills, allowing them to clear farmers' payments faster.
But the question is - is receiving timely payment a legal right of farmers or a favour being granted to them? Why are the additional profits generated from ethanol going only into the pockets of mill owners? When will farmers get their rightful share in these gains?
WHO GETS PRICE PROTECTION?
Ethanol producers receive assured prices from oil marketing companies, helping secure their returns.
Maize farmers, however, do not have a comparable legal guarantee that their produce will fetch MSP in the market. This has created a system in which companies have greater certainty over returns than the farmers supplying the raw material.
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