India’s push for biofuels, especially the E20 fuel programme, is having an unexpected effect on food prices. The price of wheat and products made from it, such as atta, maida, and suji, has gone up by around 10%. This increase is mainly because maize, a key crop, is being used more for producing ethanol.
The government’s aim with E20 fuel is to reduce reliance on imported crude oil and promote cleaner energy. Ethanol is mixed with petrol to create this blend. While this is good for energy security, it is creating a ripple effect in the agricultural markets.
Maize is a versatile crop used in many industries, including food, animal feed, and now, biofuel production. With increased demand for ethanol, more maize is being diverted to distilleries. This reduces the supply of maize available for other uses.
A significant impact is seen in the animal feed sector. Maize is a common ingredient in animal feed. When maize is less available, other feed options become more expensive. However, the by-product from maize processing for ethanol is a cheaper form of animal feed. This cheaper by-product is lowering the prices of wheat bran, which is also used in animal feed.
Food millers are facing a tough situation. They are caught between rising costs of raw materials and the pressure from cheaper alternative ingredients in the animal feed market. To make up for the higher cost of wheat and the lower prices of by-products, millers are being forced to increase the prices of essential food items like atta (flour), maida (refined flour), and suji (semolina).
This situation highlights the complex interconnections within the agricultural economy. Policies aimed at one sector, like energy, can have significant unintended consequences on another, like food security and affordability. Consumers are now paying more for staple food items, which can be a burden, especially for lower-income households.
Experts are suggesting that the government needs to carefully balance its biofuel targets with the need to ensure stable food prices. This might involve looking at alternative sources for ethanol production or managing the supply chain of maize more effectively. It is important to ensure that the transition to cleaner fuels does not negatively impact the daily lives of citizens by making basic food items unaffordable.
The rise in wheat prices is a clear indicator that while pursuing green energy goals, the government must also monitor and address the potential impact on the food supply chain and consumer prices. Finding a sustainable solution that supports both energy independence and food affordability is crucial for the nation’s economic well-being.