Amid rising prices of sugar across the country, government has taken a big step regarding ethanol production. Centre has barred the use of sugarcane juice, sugar syrup and B-heavy molasses for ethanol manufacturing during the 2026-27 Ethanol Supply Year. The move comes amid concerns over sugar production in key growing states and aims to increase domestic sugar availability while keeping prices under control.
What is govt’s new order on ethanol production?
Reuters reported that a tender issued on Friday, oil marketing companies (OMCs), including Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum, have invited bids to procure 1,100 crore litres of ethanol for the supply year beginning in November 2026. Sugar-based feedstocks, including sugarcane juice, sugar syrup and B-heavy molasses, have been excluded from the latest tender.
Under the revised arrangement, ethanol producers can bid to supply fuel made from maize, broken rice and surplus rice procured by the Food Corporation of India (FCI). This signals a shift towards grain-based ethanol production as the government seeks to protect domestic sugar supplies.
Why has Centre restricted sugar-based ethanol production?
Concerns over sugar availability and rising prices appear to be behind the decision. Lower rainfall in Maharashtra and Karnataka has raised concerns about sugarcane production in both states. Any decline in output could put further pressure on sugar supplies and prices.
Diverting sugarcane juice and molasses towards ethanol production can reduce the quantity of sugar available for domestic consumption. Restricting their use for ethanol manufacturing could help preserve supplies and ease price pressures. However, the actual impact will depend on sugar production, demand and availability of alternative feedstocks.
How much ethanol did India receive in 2025-26?
According to reports, India’s cumulative ethanol receipts by oil marketing companies reached 987 crore litres by the end of September during the 2025-26 Ethanol Supply Year. The figures were reported by the All India Distillers’ Association (AIDA). While receipts accounted for 82.5% of the 1,197 crore litres allocated under contracts for the November-to-October supply year. Grain-based feedstocks contributed 705 crore litres against an allocation of 908 crore litres, achieving a fulfilment rate of 77.6%.
Meanwhile, maize emerged as the biggest contributor, supplying 413 crore litres, or more than 41% of total ethanol receipts, against an allocation of 614 crore litres. Surplus FCI rice contributed 222 crore litres against an allocation of 233 crore litres, while damaged food grains supplied 70 crore litres against an allocation of 60 crore litres.
Sugar-based feedstocks supplied 282 crore litres against an allocation of 289 crore litres, recording a fulfilment rate of 97.6%. Sugarcane juice accounted for 151 crore litres, B-heavy molasses contributed 115 crore litres and C-heavy molasses supplied 16 crore litres
What it means for sugar mills and ethanol producers?
The restriction could change how sugar mills and ethanol manufacturers plan production during the 2026-27 supply year. Mills that previously diverted sugarcane juice or B-heavy molasses towards ethanol may need to reassess their production strategies and the quantities available for sugar manufacturing.
Grain-based ethanol producers could gain greater opportunities to supply oil marketing companies under the new tender. However, the impact on individual manufacturers will depend on feedstock availability, production costs and procurement terms. For sugar mills, protecting domestic sugar availability could help ease supply concerns. At the same time, limiting sugar-based ethanol production may affect revenue opportunities linked to ethanol, depending on how individual mills adjust their operations.
