There was a time when I thought ethanol might define the next phase of my professional life.I accepted a role as the Managing Director at a company which operated sugar mills in Andhra Pradesh. I accepted the role with one private understanding. I would give the industry two years. If I concluded that ethanol represented one of India’s most promising industrial opportunities, I would stay on and build a career around it. If not, I would move to the Foundation of the same group. The arrangement seemed reasonable. The industry, fortunately, had no vote in the matter.Two years later, I moved on. Not because ethanol lacked promise, but because I had become convinced that India was trying to solve one problem by creating another. Nearly two decades later, that conclusion seems, if anything, even more convincing.There is much to admire about India’s ethanol programme. India imports more than 85 per cent of its crude oil. Every litre of domestically produced ethanol blended into petrol reduces that dependence, strengthens energy security, saves foreign exchange, and provides a more stable market for millions of sugarcane farmers. It also cushions the sugar industry by diverting surplus sugar into fuel whenever sugar itself becomes less remunerative.Brazil demonstrated long ago that this model can work. Flexible-fuel vehicles routinely switch between petrol and ethanol, while sugar mills switch between producing sugar and fuel as market prices dictate. The country has built one of the world’s most successful biofuel ecosystems. But Brazil’s success rests on far more than a crop or a policy. It reflects the convergence of favourable climate, efficient logistics, large-scale processing, compatible vehicle technology and decades of institutional learning. In Brazil, ethanol is not merely an agricultural product. It is an ecosystem.Naturally, policymakers in India ask an obvious question. If Brazil can do it, why can’t we? It is an attractive question. Unfortunately, it has an inconvenient answer. Brazil and India may both grow sugarcane, but under very different ecological conditions.When I began studying the Brazilian model twenty years ago, and even today, one fact stands out. Brazil’s great sugarcane belt enjoys abundant rainfall. Much of its crop is rain-fed. Water, while never free, is not the defining constraint.India presents a very different picture. Sugarcane occupies barely 3-4 per cent of the country’s cultivated land, yet consumes roughly 12-15 per cent of its irrigation water. Much of it is grown in states already grappling with groundwater depletion and recurring droughts. Maharashtra and parts of Karnataka are obvious examples. Every additional hectare of sugarcane competes for a resource becoming steadily scarcer.This is where energy economics meets water ecology. An energy policy cannot be judged only by the oil it saves, but also by the scarce resources it consumes. Replacing imported petroleum with domestic water is not necessarily a national gain.The broader question is one of social cost and benefit. Ethanol undoubtedly delivers important public benefits. It reduces crude oil imports, strengthens energy security, supports farm incomes, stabilises the sugar industry and lowers transport emissions. Against these gains must be weighed costs that markets rarely price fully: groundwater depletion, subsidised irrigation, electricity for pumping water, environmental degradation, and the opportunity cost of diverting scarce water from food production or urban use. Whether ethanol generates a positive net social benefit therefore depends not only on the price of crude oil but also on the ecological value of the water it consumes. The answer is unlikely to be uniform across India and, in some regions, may not remain positive once all social costs are taken into account.Supporters of ethanol rightly point out that much of India’s early ethanol came from molasses, a by-product of sugar production. If a waste stream can displace imported fuel, few would complain. But that longer holds. Increasingly, sugarcane juice and B-heavy molasses are being diverted directly to ethanol. The crop is no longer producing sugar with ethanol as a useful by-product; an increasing share is being cultivated primarily for fuel.There is nothing inherently wrong with that, provided the resource economics justify it. That qualification matters. The debate often assumes that higher agricultural productivity automatically justifies greater production. Yet India’s sugarcane yields per hectare are already broadly comparable to Brazil’s. Despite much smaller and more fragmented holdings, Indian farmers have achieved biological productivity comparable with the world’s leading producers.Brazil’s advantage lies elsewhere. Its cane contains more recoverable sugar. Harvesting is highly mechanised, logistics more efficient, and mills operate at scales rarely seen in India. Together, these advantages enable Brazil to convert each tonne of cane into sugar and ethanol at substantially lower cost. The difference lies less in growing the crop than in what happens after it leaves the field.Nor do the economics end at the farm gate or refinery. Higher ethanol blends require adjustments across the automotive ecosystem. Manufacturers must redesign engines and fuel-system components, while owners of older vehicles may face higher maintenance or lower efficiency during the transition. These costs are neither prohibitive nor permanent, but they belong in any serious assessment of ethanol’s economics.None of this is an argument against ethanol. It is an argument against treating geography as an inconvenience. Public policy has a habit of replicating successful international models while overlooking the ecological conditions that made them successful. We import the visible outcomes while ignoring the invisible foundations.The question for India is therefore not whether ethanol is good or bad, but which ethanol, produced where, and from what feedstock. Sugarcane-based ethanol may make excellent sense in regions blessed with reliable rainfall and sustainable water resources. It is far harder to justify where groundwater tables continue to fall.Fortunately, ethanol need not depend on sugarcane alone. Maize is emerging as an important feedstock. Second-generation ethanol from agricultural residues offers another promising pathway, converting what is now burnt in fields into industrial feedstock. Municipal organic waste may eventually join the mix as technology improves. India’s long-term strategy should become progressively more diversified rather than increasingly dependent on a single water-intensive crop.Diversification is not simply environmentally desirable. It is prudent risk management. Dependence on a single feedstock leaves countries vulnerable to climate shocks, rainfall variability and commodity cycles.Join conversationView All Comments →Share your thoughts in the commentsInsightfulAgreeDisagreeSkepticalConcerningPromisingWorth ReadingBig DevelopmentPost CommentBe respectful · TOI community guidelinesIndia has an opportunity to build something more resilient. Its ethanol programme has already shown that ambitious public policy can reshape markets. The next stage is to reshape the feedstock itself. Incentives should reward crops and technologies that produce more fuel with less water, rather than treating every litre of ethanol as equally desirable regardless of how it is made.Looking back, I remain convinced that ethanol deserves an important place in India’s energy future. But water deserves an even more important place in its future. That is why, after two years in the sugar industry, I chose not to devote the next phase of my career to ethanol. I came away believing not that ethanol lacked promise, but that India’s comparative advantage lay beyond sugarcane.Oil can be imported. Water cannot. Energy security is essential. Water security is existential. A wise nation should never secure the former by compromising the latter.Get the latest India News and Live updates. Download the TOI app.About the AuthorV RaghunathanV Raghunathan is a former director of the Schulich School of Business (India Program), York University, Toronto, a former professor at IIM Ahmedabad and a former President of ING Vysya Bank. A prolific author, he has written over 15 books, including the national bestseller Games Indians Play (Penguin). With more than 600 published papers and articles, his latest books include The Lion, The Admiral, and A Cat Called B. Uma Vijaylakshmi (Westland, 2025) and To Every Parent; To Every Child (Penguin, 2025) and Irrationally Rational: 10 Nobel Laureates Script the Story of Behavioural Economics (Penguin, 2022), among others.Read MoreEnd of ArticleFollow Us On Social MediaVideosSC Extends Section 498A Protection To Women In Marriage-Like Live-In RelationshipsWhatsApp Puts Multiple Accounts Under Review, Users Locked Out As Company Admits Mistakes Can HappenUdhayanidhi Stalin Detained Over Trisha Row |FIR, Political Storm & “I’ll Face It Legally” ExplainedPulwama Man Held With Hand Grenade, Anti-National Posters After Kulgam Terror AttackHigh-Level Probe Ordered As Security Forces Launch Massive Valley-Wide Manhunt | WatchSC Clarifies ‘Criminal Antecedents’ Caveat;CJP Demands Immediate Withdrawal Of FIRs Against StudentsAssam Govt Launches Relief Package As Over 1.36 Lakh People Remain Flood Affected | WatchIndian Parl Panel Grills Meta Over PM Modi Video Takedown, Seeks Mark Zuckerberg’s ApologyBankipur Shock, Datia Loss: BJP Suffers Twin Setback, But Why Isn’t It Good News For Opposition?Bengal STF Busts Alleged JeM Module, Probe Points To Pak-Based Handlers And Intelligence Network123PhotostoriesFrom Collarwali to Charger: 5 legendary tigers of IndiaNot lemon, baking soda or detergent: This one ingredient can remove foul smell permanently from water bottles and lunch boxesThe 7 germiest things in your hotel room that most guests touch without thinkingThe most beautiful buildings in the world have been ranked and one is from India5 wedding sarees which are best for wedding season 20269 Maharashtrian vegetarian dishes everyone should try onceFive women, five golds, one unforgettable day: Meet the Indian champions who rewrote Commonwealth Games boxing history in GlasgowWhy Popcorn pops: Understanding the chemical science reaction behind it10 Indian snacks that are healthier than biscuits7 high-protein breads you should add to your diet123Hot PicksCJP nationwide tourGold Rate TodayMJPRU resultBSE SensexRBI FD ruleManmohan Singh LiberhanKarnataka cabinet expansionUdhayanidhi StalinD Y PatilTop TrendingFaridabad MurderUdhayanidhi StalinPanchkula Army Captain Wife DeathPappu Yadav Slipper AttackPM ModiKarnataka Cabinet ExpansionTrisha KrishnanD Y Patil DeathBypoll Election Result 2026Shradha Singh
There was a time when I thought ethanol might define the next phase of my professional life.I accepted a role as the Managing Director at a company which operated sugar mills in Andhra Pradesh. I accepted the role with one private understanding. I would give the industry two years. If I concluded that ethanol represented one of India’s most promising industrial opportunities, I would stay on and build a career around it. If not, I would move to the Foundation of the same group. The arrangement seemed reasonable. The industry, fortunately, had no vote in the matter.Two years later, I moved on. Not because ethanol lacked promise, but because I had become convinced that India was trying to solve one problem by creating another. Nearly two decades later, that conclusion seems, if anything, even more convincing.There is much to admire about India’s ethanol programme. India imports more than 85 per cent of its crude oil. Every litre of domestically produced ethanol blended into petrol reduces that dependence, strengthens energy security, saves foreign exchange, and provides a more stable market for millions of sugarcane farmers. It also cushions the sugar industry by diverting surplus sugar into fuel whenever sugar itself becomes less remunerative.Brazil demonstrated long ago that this model can work. Flexible-fuel vehicles routinely switch between petrol and ethanol, while sugar mills switch between producing sugar and fuel as market prices dictate. The country has built one of the world’s most successful biofuel ecosystems. But Brazil’s success rests on far more than a crop or a policy. It reflects the convergence of favourable climate, efficient logistics, large-scale processing, compatible vehicle technology and decades of institutional learning. In Brazil, ethanol is not merely an agricultural product. It is an ecosystem.Naturally, policymakers in India ask an obvious question. If Brazil can do it, why can’t we? It is an attractive question. Unfortunately, it has an inconvenient answer. Brazil and India may both grow sugarcane, but under very different ecological conditions.When I began studying the Brazilian model twenty years ago, and even today, one fact stands out. Brazil’s great sugarcane belt enjoys abundant rainfall. Much of its crop is rain-fed. Water, while never free, is not the defining constraint.India presents a very different picture. Sugarcane occupies barely 3-4 per cent of the country’s cultivated land, yet consumes roughly 12-15 per cent of its irrigation water. Much of it is grown in states already grappling with groundwater depletion and recurring droughts. Maharashtra and parts of Karnataka are obvious examples. Every additional hectare of sugarcane competes for a resource becoming steadily scarcer.This is where energy economics meets water ecology. An energy policy cannot be judged only by the oil it saves, but also by the scarce resources it consumes. Replacing imported petroleum with domestic water is not necessarily a national gain.The broader question is one of social cost and benefit. Ethanol undoubtedly delivers important public benefits. It reduces crude oil imports, strengthens energy security, supports farm incomes, stabilises the sugar industry and lowers transport emissions. Against these gains must be weighed costs that markets rarely price fully: groundwater depletion, subsidised irrigation, electricity for pumping water, environmental degradation, and the opportunity cost of diverting scarce water from food production or urban use. Whether ethanol generates a positive net social benefit therefore depends not only on the price of crude oil but also on the ecological value of the water it consumes. The answer is unlikely to be uniform across India and, in some regions, may not remain positive once all social costs are taken into account.Supporters of ethanol rightly point out that much of India’s early ethanol came from molasses, a by-product of sugar production. If a waste stream can displace imported fuel, few would complain. But that longer holds. Increasingly, sugarcane juice and B-heavy molasses are being diverted directly to ethanol. The crop is no longer producing sugar with ethanol as a useful by-product; an increasing share is being cultivated primarily for fuel.There is nothing inherently wrong with that, provided the resource economics justify it. That qualification matters. The debate often assumes that higher agricultural productivity automatically justifies greater production. Yet India’s sugarcane yields per hectare are already broadly comparable to Brazil’s. Despite much smaller and more fragmented holdings, Indian farmers have achieved biological productivity comparable with the world’s leading producers.Brazil’s advantage lies elsewhere. Its cane contains more recoverable sugar. Harvesting is highly mechanised, logistics more efficient, and mills operate at scales rarely seen in India. Together, these advantages enable Brazil to convert each tonne of cane into sugar and ethanol at substantially lower cost. The difference lies less in growing the crop than in what happens after it leaves the field.Nor do the economics end at the farm gate or refinery. Higher ethanol blends require adjustments across the automotive ecosystem. Manufacturers must redesign engines and fuel-system components, while owners of older vehicles may face higher maintenance or lower efficiency during the transition. These costs are neither prohibitive nor permanent, but they belong in any serious assessment of ethanol’s economics.None of this is an argument against ethanol. It is an argument against treating geography as an inconvenience. Public policy has a habit of replicating successful international models while overlooking the ecological conditions that made them successful. We import the visible outcomes while ignoring the invisible foundations.The question for India is therefore not whether ethanol is good or bad, but which ethanol, produced where, and from what feedstock. Sugarcane-based ethanol may make excellent sense in regions blessed with reliable rainfall and sustainable water resources. It is far harder to justify where groundwater tables continue to fall.Fortunately, ethanol need not depend on sugarcane alone. Maize is emerging as an important feedstock. Second-generation ethanol from agricultural residues offers another promising pathway, converting what is now burnt in fields into industrial feedstock. Municipal organic waste may eventually join the mix as technology improves. India’s long-term strategy should become progressively more diversified rather than increasingly dependent on a single water-intensive crop.Diversification is not simply environmentally desirable. It is prudent risk management. Dependence on a single feedstock leaves countries vulnerable to climate shocks, rainfall variability and commodity cycles.
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Be respectful · TOI community guidelines
India has an opportunity to build something more resilient. Its ethanol programme has already shown that ambitious public policy can reshape markets. The next stage is to reshape the feedstock itself. Incentives should reward crops and technologies that produce more fuel with less water, rather than treating every litre of ethanol as equally desirable regardless of how it is made.Looking back, I remain convinced that ethanol deserves an important place in India’s energy future. But water deserves an even more important place in its future. That is why, after two years in the sugar industry, I chose not to devote the next phase of my career to ethanol. I came away believing not that ethanol lacked promise, but that India’s comparative advantage lay beyond sugarcane.Oil can be imported. Water cannot. Energy security is essential. Water security is existential. A wise nation should never secure the former by compromising the latter.
