Shares of major Indian sugar producers declined by as much as 6% in early trading on Oct 19 after the government restricted sugarcane-based ethanol procurement for the 2026-27 supply year.
The latest tender issued by state-run oil marketing companies (OMCs) excludes ethanol produced from sugarcane juice, sugar syrup and B-heavy molasses.
The move aims to increase domestic sugar availability and control rising prices ahead of the main crushing season.
Balrampur Chini Mills, EID Parry, Triveni Engineering and Industries, Bajaj Hindusthan Sugar, Shree Renuka Sugars and Dhampur Sugar Mills recorded declines ranging from 2% to 6%.
Govt Prioritises Sugar Supply Amid Rising Prices
India, the world's largest sugar consumer, has witnessed sugar prices increase by more than 10% during the festive season.
The decision could affect sugar companies' profitability by limiting their flexibility to divert sugarcane and molasses between sugar manufacturing and ethanol production.
It may also reduce returns on investments made to expand ethanol manufacturing capacity. Bharat Petroleum Corporation Limited (BPCL) issued the procurement tender on Oct 16 on behalf of state-run oil marketing companies.
The tender seeks approximately 11 billion litres of ethanol for the supply year beginning in November 2026.
The procurement is intended to support India's target of blending 20% ethanol with petrol. However, the tender excludes supplies derived from sugarcane juice, sugar syrup and B-heavy molasses.
The government has also reduced the procurement price for maize-based ethanol from ₹71.86 to ₹68.86 per litre.
India has promoted ethanol blending to reduce dependence on imported crude oil and strengthen domestic fuel security.
However, using sugarcane for fuel production can reduce supplies available for food consumption, particularly during periods of lower agricultural output.
The latest restrictions highlight the government's effort to balance energy requirements with domestic food availability and price stability.
