The Indian government has directed oil marketing companies (OMCs) to set sugar diversion for ethanol production at zero for the 2026–27 ethanol supply year, which begins in November. The decision excludes ethanol produced from sugarcane juice, sugar syrup and B-heavy molasses from the latest procurement tender, as the government seeks to safeguard domestic sugar availability amid concerns over lower production and rising prices.
The tender, issued on October 16, invites bids for around 11 billion litres of ethanol. State-run Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) will procure ethanol made from alternative feedstocks, including maize, broken rice and surplus rice procured by the Food Corporation of India.
Domestic Sugar Supply Takes Priority
India has traditionally relied on surplus sugarcane-based products to support its ethanol-blending programme. However, weak rainfall in key sugar-producing states, including Maharashtra and Karnataka, has raised concerns about sugar output and domestic availability. Sugar prices have also climbed sharply, adding pressure to supplies.
By preventing sugar-based feedstocks from being diverted to ethanol, the government aims to make more sugarcane available for sugar production. The move reflects a policy balance between ensuring adequate sugar supplies and meeting the country’s fuel-blending requirements.
Grain-Based Ethanol Remains Eligible
The latest tender allows suppliers to offer ethanol produced from maize, broken rice and surplus rice. This keeps grain-based ethanol as a key source for meeting fuel requirements while sugar-based feedstocks are excluded.
The procurement terms also reduce the incentive for maize-based ethanol by ₹3 per litre, from ₹5.79 to ₹2.79. As a result, the procurement price for maize-based ethanol falls from ₹71.86 to ₹68.86 per litre.
E20 Target and Energy Security
India has made E20—the blending of 20% ethanol with petrol—the nationwide standard as part of its efforts to reduce crude oil imports and emissions. The government is seeking to maintain the blending programme while protecting domestic food and sugar supplies.
The shift towards grain-based ethanol highlights the changing composition of India’s biofuel industry. The impact of the new tender will depend on feedstock availability, procurement prices and the ability of ethanol producers to meet demand from alternative sources.
