Ethanol push turns India into corn importer, shaking up global market
(Source – The Hindu, International Edition – Page No. – 13)
| Topic: GS3 – Indian Economy |
| Context |
| ● India’s shift to corn-based ethanol, driven by a hike in procurement prices, has turned India from a top corn exporter to a net importer.
● This change impacts local poultry producers, elevates global corn prices, and prompts calls for policy adjustments to address rising feed costs and import duties. |
Ethanol Shift and Import Dynamics
- India’s increased focus on corn-based ethanol has turned it from Asia’s top corn exporter into a net importer for the first time in decades.
- The government raised the procurement price of corn-based ethanol in January to encourage a shift from sugarcane-based ethanol, aimed at reducing carbon emissions and ensuring a steady sugar supply.
- India is set to become a permanent net importer of corn, supporting global prices that are currently near four-year lows.
Impact on Local Industries
- Local poultry producers are struggling due to rising feed costs, with corn prices exceeding global benchmarks.
- They are advocating for the removal of import duties and lifting the ban on genetically modified (GM) corn, which limits their purchasing options.
- India’s corn exports are expected to drop to 450,000 tons in 2024, while imports are projected to reach a record 1 million tons, primarily from Myanmar and Ukraine.
Supply and Demand Imbalance
- The ethanol distilleries’ demand for corn has surged, following a government decision to curb sugarcane use due to a drought, creating a 5 million-ton shortfall.
- Ethanol distilleries are estimated to need 6 to 7 million tons of corn annually, a demand that will likely be met through imports.
Economic Impact and Adjustments
- The increase in corn prices has pushed poultry production costs higher, leading to financial strain for growers.
- Efforts to mitigate costs include substituting corn with cheaper alternatives in feed.
- Farmers are expanding corn cultivation due to higher prices, with a 7% increase in area under corn compared to last year.
Trade and Price Adjustments
- Indian demand has driven up corn prices in Myanmar, benefiting local farmers and exporters.
- Starch producers are importing duty-free corn from Ukraine through India’s Advance License Scheme.
- Overall, India’s corn imports surged significantly in early 2024, while exports plummeted, reflecting the shift in trade dynamics.
| Practice Question: Discuss the implications of India’s policy shift towards increased ethanol blending. How does this policy impact local industries, such as poultry, and what are the potential long-term effects on global corn markets? (250 Words /15 marks) |
