Government bars ethanol making from sugarcane

The Central Government has excluded sugar-based ethanol from its procurement tender for the 2026-27 supply year and has directed the state-run oil marketing companies (OMCs) to ensure zero diversion of sugar for ethanol production.

The tender, issued on October 16 by Indian Oil (IOCL), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL), seeks to procure 11 billion litres of ethanol for the supply year beginning in November 2026. Bids will be accepted for ethanol produced from corn, broken rice and surplus Food Corporation of India (FCI) rice. Ethanol derived from sugarcane juice, sugar, sugar syrup and B-heavy molasses has been excluded.

The government has also reduced the incentive for corn-based ethanol by Rs 3 per litre, from Rs 5.79 to Rs 2.79. Consequently, the procurement price has fallen from Rs 71.86 to Rs 68.86 per litre.

Sugar in the Centre

The move comes as India seeks to control domestic sugar prices and ensure adequate supplies. The country is the world’s largest sugar consumer, and sugar-based ethanol has played a significant role in its ethanol-blending programme.

Concerns over sugar production have also emerged following weaker rainfall in major producing states, including Maharashtra and Karnataka, raising uncertainty about output for the current season.

India introduced mandatory nationwide E20 petrol, containing 20% ethanol, earlier this year to reduce emissions and dependence on imported crude oil. However, diverting sugarcane-based products towards ethanol production can reduce the quantity of sugar available for domestic consumption.

The latest restrictions are aimed at prioritising sugar availability while allowing ethanol procurement to continue through alternative feedstocks such as corn and rice.