ICRIER expert Ramesh Chand is advocating for guaranteed Minimum Support Price (MSP) for maize to encourage farmers to shift from water-intensive paddy. For investors, this highlights the structural challenges in the ethanol blending programme, where maize market prices have consistently trailed MSP, impacting the feedstock supply strategy for the sugar and distillery sector.
Ramesh Chand, a distinguished expert at the Indian Council for Research on International Economic Relations (ICRIER), has renewed calls for a strategic overhaul of India’s agricultural feedstock policy. His proposal centers on providing assured Minimum Support Price (MSP) for maize, a move designed to incentivize farmers to pivot away from water-intensive paddy cultivation, particularly in regions like Punjab and Haryana, toward maize—a key raw material for India’s ethanol blending goals.
The Case for Maize as Ethanol Feedstock
Proponents of this shift argue that maize is the most viable and efficient feedstock for ethanol production when considering long-term environmental and economic costs. By substituting a portion of rice acreage with maize, the government aims to achieve two goals simultaneously: alleviating the severe groundwater depletion caused by paddy cultivation and meeting the growing demand for ethanol in the fuel supply chain. Chand emphasizes that without a safety net like an assured MSP, farmers remain locked into paddy, which currently benefits from a more reliable procurement ecosystem.
Market Reality and Price Gaps
While the push for maize is theoretically sound for ethanol production, the ground reality as of August 2026 presents a disconnect. Market data from recent quarters indicates that maize prices in various mandis have consistently traded below the government-announced MSP. This price gap has made the crop less attractive for farmers despite the rising demand for ethanol. For the ethanol industry, this mismatch has created complications; distilleries have frequently relied on cheaper, government-supplied rice, reducing their active procurement of maize from the open market. This reliance on subsidized rice has, at times, undermined the objective of transitioning to maize-based ethanol production.
Impact on the Sugar and Ethanol Sector
For investors tracking the sugar and ethanol industry, this debate is critical because it dictates the future of raw material costs and availability. Companies in the distillery space rely heavily on steady feedstock prices to manage their profit margins. If the government mandates an assured procurement framework for maize, it could stabilize the supply chain for ethanol producers, potentially reducing volatility. However, it may also lead to higher input costs if the era of cheap, surplus government-supplied rice ends. The sector’s profitability and execution efficiency remain tied to the policy environment surrounding feedstock procurement.
Risks and Monitoring Factors
Several risks persist in this transition. The lack of robust storage and localized procurement infrastructure for maize remains a significant bottleneck that could prevent farmers from realizing better prices, even if an MSP policy is announced. Furthermore, the credibility of ethanol blending targets depends on a sustainable supply of grain. Investors should track future policy announcements regarding a potential 'Maize Control Order' or similar procurement mechanisms, as any decision to prioritize maize could change the feedstock mix for major ethanol manufacturers. Monitoring the price trend of maize versus rice will be key to understanding the margin pressures on distillery firms in the coming quarters.