India has directed oil marketing companies to stop diverting sugar for ethanol production during the 2026-27 supply year, prioritising domestic sugar availability amid concerns over lower output and record-high prices.
According to a tender issued on Friday, ethanol produced from sugarcane juice, sugar syrup and B-heavy molasses has been excluded from the latest procurement process, Business Standard reported.
The decision highlights the government's challenge of balancing its ethanol-blending programme with the need to maintain adequate sugar supplies.
Poor rainfall in Maharashtra and Karnataka has raised concerns about sugarcane production, prompting efforts to protect domestic availability.
Oil Companies Seek 11 Billion Litres Of Ethanol From Alternative Feedstocks
State-run Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation have jointly invited bids for 11 billion litres of ethanol for the supply year beginning in November.
The tender permits ethanol produced from corn, broken rice and surplus rice procured through the Food Corporation of India (FCI).
However, suppliers cannot offer ethanol manufactured using sugarcane juice, sugar, sugar syrup or B-heavy molasses under the latest tender.
India has traditionally relied on surplus sugarcane-based feedstocks to support its ethanol-blending targets.
The revised procurement strategy shifts demand towards grain-based alternatives while the government seeks to improve sugar availability.
The restriction follows earlier discussions about limiting sugarcane diversion after unfavourable rainfall affected expectations for the upcoming harvest.
Corn Ethanol Procurement Price Cut As Govt Prioritises Sugar Supply
The oil marketing companies have also reduced the incentive for corn-based ethanol from ₹5.79 per litre to ₹2.79 per litre.
Consequently, the procurement price has fallen from ₹71.86 per litre to ₹68.86 per litre, according to the tender.
India introduced mandatory nationwide E20 petrol blending earlier this year to reduce dependence on imported oil and limit pollution.
The programme requires petrol to contain 20% ethanol, creating substantial demand for biofuel supplies.
However, some motorists have expressed concerns about the compatibility of ethanol-blended petrol with older vehicles.
In August, Reuters reported that India was considering restrictions on sugarcane use for ethanol during the season beginning in October.
The latest tender reflects the government's decision to prioritise sugar production while continuing ethanol procurement through alternative agricultural feedstocks.
The policy could reshape demand for corn and rice-based ethanol during the coming supply year.
