Godzilla El Nino to hit sugarcane fields: Could it derail India's ethanol dreams?

With a strong El Nino expected to impact India's monsoon, sugarcane yields are likely to drop. Here's why that could undermine India's efforts to adopt sustainable fuel alternatives and reduce dependency on oil imports.

India's ambitious ethanol blending programme has become a cornerstone of its strategy to reduce dependence on imported crude oil and lower transport emissions.

However, the return of El Nino and the prospect of a weaker monsoon are raising concerns that climate risks could disrupt the country's biofuel ambitions.

India, once the world's second-largest sugar exporter, is now expected to have little or no exportable sugar surplus for at least the next three seasons. Weaker sugarcane production due to El Nino-induced weather conditions, coupled with rising demand for ethanol, is expected to tighten domestic supplies.

The twin pressures could keep millions of tonnes of sugar off the global market, reducing exports to Asia, Africa and the Middle East while supporting benchmark sugar prices in London and New York.

But as concerns grow, questions are also emerging over whether climate risks could complicate the country’s biofuel plans.

"Climate patterns like El Nino could disrupt India's ethanol production, because ethanol supply also depends on weather-sensitive crops like sugarcane, which provides sugar," said Prof. Anjal Prakash, Faculty of Public Policy, FLAME University. "When sugarcane outputs tighten, authorities have to reduce diversion towards ethanol production to protect sugar availability and domestic prices. This makes ethanol production vulnerable to weather."

Although no immediate crisis is predicted, forecasts of weaker monsoon rains and potentially lower sugar output remain real issues for India’s ethanol programme.

What is Ethanol blending, and why is India doing it?

Ethanol blending refers to mixing ethanol, which is a biofuel produced from agricultural feedstocks, with petrol.

The government has promoted the programme to reduce crude oil imports, support farmers and lower carbon emissions from vehicles.

India advanced its target of achieving 20% ethanol blending in petrol from 2030 to the Ethanol Supply Year (ESY) 2025-26 and has since rolled out E20 fuel across the country.

According to the Ministry of Petroleum and Natural Gas and NITI Aayog, the blending programme has helped save foreign exchange, reduced dependence on fossil fuels and created an additional source of income for farmers and sugar mills, especially at a time when crude oil supply is down owing to the West Asia war between the US, Israel, and Iran.

Although ethanol can be produced from maize, damaged food grains and other biomass, sugarcane and sugar industry by-products such as molasses have played a major role in the programme’s growth.

In recent years, sugar mills have increasingly diverted sugarcane juice and molasses towards ethanol production.

Sugarcane-based feedstocks have dominated India’s ethanol programme because the country already has a large, well-established sugar industry with an extensive network of mills and distilleries.

Furthermore, molasses and sugarcane juice offered an existing supply chain that allowed ethanol production to expand relatively quickly.

What's apparent is that ethanol blending is meant to do good, but it's also tied to India's sugarcane yields. That's where the problem begins.

Is El Nino bad for Ethanol blending?

The India Meteorological Department (IMD) officially declared the onset of El Nino on June 12, forecasting that the climate pattern will persist through April 2027. The declaration reinforced IMD's earlier prediction of below-normal southwest monsoon rainfall this year.

While El Nino has historically been linked to weaker monsoons in India, its effects vary and not every event results in drought. However, the phenomenon poses a particular challenge for water-intensive crops like sugarcane, which rely heavily on rainfall and irrigation.

Reduced rainfall combined with higher temperatures could lower yields, especially in India's major sugar-producing states.

Dr Aneesha Dalmia, Chairperson of Rotary International Programme of Scale, noted that the timing of rainfall is just as important as the amount.

"Sugarcane is particularly vulnerable during its tillering and elongation stages, when the crop develops most of the stalks that are eventually harvested," said Dalmia. "Water stress during this period can sharply reduce yields."

In recent weeks, news agency Reuters cited traders, millers and analysts who have pointed to concerns that El Nino-related weather conditions could reduce sugar production and limit exportable supplies.

Some market participants went as far as to say that India could remain largely absent from global sugar markets for the next few years if supplies remain tight.

Similar weather-related disruptions have occurred before.

Following the 2015 El Nino-induced drought, India imported sugar during the 2016-17 and 2017-18 seasons after sugarcane production declined.

During the 2023 El Nino episode, weaker output also prompted restrictions on sugar exports and tighter controls on sugar diversion for ethanol production.

As of now, the scenarios we are looking at are forecasts, not outcomes, but history offers many lessons.

The extent of impact will ultimately depend on how the monsoon progresses and how strongly El Nino influences rainfall patterns.

How can sugarcane yields affect Ethanol blending?

If sugarcane production declines, policymakers and sugar mills could naturally face a balancing act.

Sugar remains an essential food commodity, and domestic supplies take priority, as has been clearly articulated by the government in the past.

Food Secretary Sanjeev Chopra has previously said India's order of utilisation is domestic sugar consumption first, recalled Dalmia, adding that ethanol production comes second and exports come last when supplies tighten.

This challenge and its response have been witnessed quite recently.

Concerns over lower output and domestic availability have already led the government to restrict sugar exports until September 2026. That deadline could also be potentially extended, depending on how the circumstances evolve.

At the same time, diverting larger quantities of cane towards ethanol production can tighten sugar supplies. A reduction in ethanol feedstock availability, meanwhile, could affect blending levels.

That does not necessarily mean India’s ethanol programme will slow down, but it does highlight the need for securing different sources of biofuel feedstock.

Is sugarcane the only option?

Recognising this challenge, the government’s ethanol roadmap has long emphasised feedstock diversification, and it's already preparing.

NITI Aayog’s Roadmap for Ethanol Blending in India and the National Policy on Biofuels encourage the use of maize, surplus rice, damaged food grains and agricultural residues alongside sugar-based feedstocks.

It's therefore no surprise that grain-based feedstocks such as maize now contribute nearly two-thirds of India's ethanol production, helping cushion the programme against fluctuations in sugarcane output during poor monsoon years.

The government has also promoted second-generation ethanol projects that use crop residues instead of food crops.

Officials see these technologies as a way to strengthen energy security while reducing dependence on a single feedstock.

For now, there is no indication that India’s ethanol targets are under immediate threat. But the concerns surrounding El Nino have highlighted a broader issue.

An issue of how climate variability could increasingly influence the availability of crops that are the foundation of the country’s biofuel ambitions.

Whether this year’s El Nino significantly affects sugarcane production remains uncertain. But as India pushes ahead with its energy transition, one notion is gaining credibility each passing day. Climate, agriculture and fuel security are becoming more closely intertwined.

In that sense, the challenge posed by El Nino is not simply about sugar or ethanol but about how India can build a more resilient biofuel ecosystem in an era of increasing climate uncertainty.

This article has valuable insights of Prof. Anjal Prakash, Faculty of Public Policy, FLAME University.