What Happened
- ISMA Director General Deepak Ballani stated there is "no question" of ethanol being included in the India-US bilateral trade agreement, asserting that India's domestic ethanol programme would remain protected.
- Under the India-US joint statement of February 6, 2026, ethanol has been classified as a highly sensitive agricultural product, ensuring it remains shielded from immediate tariff reductions.
- India committed to reducing import duties on certain US agricultural products such as Dried Distillers Grains (DDG), red sorghum, nuts, fruits, soybean oil, and wine/spirits, but ethanol was kept out.
- ISMA emphasised that India has invested over Rs 40,000 crore in ethanol production infrastructure with annual capacity exceeding 9,000 million litres from sugarcane, and any import liberalisation would undermine this investment.
- The sugar industry body is advocating for a roadmap beyond E20 blending, targeting E27 and higher levels.
Static Topic Bridges
India's Ethanol Blending Programme (EBP)
India's Ethanol Blending Programme aims to blend ethanol with petrol to reduce fossil fuel imports, lower vehicular emissions, and provide an additional revenue stream for sugarcane farmers. The National Policy on Biofuels, 2018 (amended 2022) advanced the E20 target (20% ethanol blending) from 2030 to Ethanol Supply Year 2025-26. The programme uses a differential pricing mechanism where oil marketing companies (OMCs) procure ethanol produced from various feedstocks (sugarcane juice, B-heavy molasses, C-heavy molasses, damaged food grains, and surplus rice) at government-determined prices.
- E20 target year: ESY 2025-26 (originally 2030, advanced by 5 years)
- Current blending achievement: approximately 19.05% as of July 2025
- Ethanol capacity from sugarcane: 9,000+ million litres annually
- Total ethanol offered for ESY 2025-26: 17,760 million litres (vs OMC demand of 10,500 million litres)
- Estimated annual savings from E20: approximately USD 4 billion in import bill reduction
- Grain-based ethanol (rice, maize) contributes 13,040 million litres; sugarcane-based contributes 4,710 million litres
- Next target: E30 (30% blending) expected between 2028-2030
Connection to this news: ISMA's firm stance against ethanol imports in the trade deal reflects the industry's concern that cheap US corn-based ethanol could undercut the Rs 40,000 crore domestic investment and disrupt the sugarcane-ethanol value chain.
India-US Trade Relations and the February 2026 Framework
The India-US bilateral trade relationship has grown to approximately USD 200 billion annually, making the US India's largest trading partner. The February 6, 2026 joint statement outlined a framework for an interim trade agreement that would remove the punitive 25% tariff on Indian goods, reduce US reciprocal tariffs from 25% to 18%, and commit India to tariff cuts on select US industrial and agricultural products. India has historically maintained high tariffs on agricultural imports to protect domestic farmers and food security objectives.
- India-US bilateral trade: approximately USD 200 billion (2025)
- US 25% tariff on Indian goods to be removed under the framework
- US reciprocal tariffs on Indian goods: reduced from 25% to 18%
- India to reduce duties on DDG, red sorghum, nuts, soybean oil, wine/spirits
- Ethanol classified as "highly sensitive" agricultural product -- excluded from tariff cuts
- India's average applied tariff on agricultural products: approximately 35-40% (among the highest globally)
Connection to this news: The exclusion of ethanol from the trade deal represents India's negotiating strategy of protecting strategically important domestic programmes while making concessions on products where domestic supply is either insufficient or where Indian producers are competitive.
Sugarcane Economy and Farmer Welfare Linkage
India is the world's second-largest sugar producer (after Brazil), with approximately 50 million sugarcane farmers and 5 million workers in 530+ sugar mills. The ethanol programme is integral to the financial viability of the sugar industry, providing mills an alternative revenue stream during surplus years. The government's Fair and Remunerative Price (FRP) for sugarcane is determined by CACP and fixed under the Sugarcane (Control) Order, 1966 issued under the Essential Commodities Act, 1955. Many states also declare State Advised Prices (SAPs) above the FRP.
- India: 2nd largest sugar producer globally; production approximately 32-34 million tonnes annually
- 50 million sugarcane farmers, 530+ sugar mills
- FRP for sugarcane (2025-26): Rs 340 per quintal
- Sugar MSP: Rs 31 per kg (unchanged since 2019, per ISMA's concerns)
- Sugar mills divert excess sugarcane to ethanol to manage surplus and farmer payments
- ISMA demands: MSP hike, ethanol price revision, fair feedstock allocation
Connection to this news: ISMA's opposition to ethanol imports is driven by the interconnected sugarcane-sugar-ethanol ecosystem where any disruption to the ethanol programme directly affects mill viability and, consequently, farmer payment timelines.
Key Facts & Data
- India's ethanol production capacity from sugarcane: 9,000+ million litres annually
- Industry investment in ethanol infrastructure: Rs 40,000+ crore
- E20 blending target: ESY 2025-26; current achievement approximately 19%
- India-US bilateral trade: approximately USD 200 billion
- 50 million sugarcane farmers, 530+ sugar mills in India
- Ethanol classified as "highly sensitive" in India-US trade framework (February 2026)
- Annual foreign exchange savings from E20: approximately USD 4 billion