Rising fuel demand outpacing food supply, pushing sugar prices higher: study

India's push to increase ethanol-blended fuel consumption is intensifying pressure on agricultural markets, according to research from the Indian Council for Research on International Economic Relations. The widening gap between rapid growth in fuel demand and available feedstock is directly influencing food and feed commodity prices, with sugar emerging as a key indicator of market stress.

The ICRIER study underscores how India's biofuel ambitions are creating competing demands on agricultural production. As the country accelerates its ethanol fuel programme to meet energy targets and reduce fossil fuel dependence, the feedstock requirements are straining supplies typically reserved for food and animal feed, thereby pushing up prices across multiple segments.

To address this challenge, researchers have called for a more flexible approach to India's ethanol strategy. Rather than pursuing rigid blending targets regardless of feedstock constraints, policymakers should consider adaptive mechanisms that balance fuel production goals with food security concerns. Such flexibility could help prevent commodity price spikes that affect consumers while still supporting renewable fuel objectives.

The findings come at a time when India is grappling with inflationary pressures and rising input costs. The analysis suggests that without strategic recalibration, continued expansion of ethanol-blended fuels could exacerbate food price volatility, particularly affecting vulnerable populations dependent on stable commodity prices.