US Trade Pressure Threatens Ethanol Industry

16-Jun-2025 11:33 AM

In the ongoing discussions between India and the United States over a bilateral trade agreement, the US is pushing for India to ease its restrictions on ethanol imports. While the Indian government is seriously considering this demand, there are growing concerns that it could pose a serious threat to the domestic ethanol industry.

Sources indicate that the US is particularly focused on the removal of restrictions on the import of fuel ethanol, which is primarily used for blending with petrol. Currently, India bans the import of fuel ethanol and imposes high customs duties on non-fuel ethanol imports. These measures are intended to safeguard the domestic ethanol manufacturing sector.

Industry analysts warn that allowing unrestricted imports of ethanol, especially from the US where production costs are lower, could have far-reaching consequences. In India, ethanol is largely produced from sugarcane and grains such as maize and rice. Indian distillers have made significant investments in building and upgrading distilleries. If cheaper ethanol from the US enters the Indian market in large volumes, domestic producers could face heavy financial losses. This could also negatively impact sugarcane farmers, who may face delays or defaults in payment for their produce.

Additionally, maize prices may decline sharply, discouraging farmers from growing the crop. Investor confidence could also weaken, making it difficult for banks and financial institutions to recover loans extended to ethanol producers. This situation could derail the Indian government’s target of becoming self-sufficient in ethanol production under the 'Make in India' initiative.

Despite recent growth in domestic ethanol production, the potential opening of the market to US ethanol could undermine these gains and threaten the stability of the entire value chain—from farmers to manufacturers and financiers.