Sugar mills push for higher ethanol price amid shift toward grains based production

India’s cooperative sugar industry is urging the government to revise ethanol procurement prices and extend blending targets beyond the current 20 percent threshold. This demand comes in the wake of a significant shift in the ethanol landscape, where sugar-based ethanol’s contribution has plummeted from 73% to just 28%, while grain-based ethanol continues to gain ground.

Cooperative sugar mills estimate that India’s closing sugar stocks for the 2024-25 season—which ends in September 2025—will be around 4.86 million tonnes. This level is considered sufficient to meet domestic demand during the high-consumption months of October and November 2025.

Earlier concerns about a possible sugar shortfall during the festival season had arisen due to a nearly 20 percent drop in sugar production compared to the 2023-24 season. However, the situation has stabilized, thanks to several supportive factors.

“Currently, the ex-mill sugar prices remain stable, ranging between ₹3,880 and ₹3,920 per quintal. This stability is supported by lower net production, strong market demand, and timely-government interventions — notably the strategic allowance of limited sugar exports and controlled release of monthly domestic quotas. These have led to the balanced supply in the domestic market,” said the National Federation of Cooperative Sugar Factories (NFCSF), in a statement.

The sugar industry is also calling for faster adoption of flex-fuel vehicles (FFVs) to help increase ethanol consumption and prepare the market for higher blending levels.

The recent surge in grain-based ethanol production poses a challenge to sugar mills, many of which have invested heavily in infrastructure for ethanol production. Harshwardhan Patil, President of the National Cooperative Sugar Factories Association, said current ethanol procurement prices offered by oil marketing companies are not viable for sugar mills.

“Although there is potential to divert up to 40 lakh metric tonnes (LMT) of sugar into ethanol this year, only 32 LMTs are expected to be diverted. This shortfall is due to the gap between ethanol prices and the better returns from selling sugar directly in the domestic market. As a result, India’s ethanol production capacity of 952 crore litres per year—including 130 crore litres from multi-feed distilleries—is being underused,” he stated.

The shift in feedstock dynamics has been dramatic. In 2017-18, India produced no ethanol from grain sources. But for the 2024-25 ethanol supply year (December to November), sugar-based feedstock is expected to yield 250 crore litres of ethanol, while grain-based sources are projected to produce a staggering 650 crore litres.

Given this shift and rising input costs, Patil has called on the government to raise ethanol procurement prices to reflect the increased cost of sugarcane and ensure the economic viability of sugar-based ethanol production.