Govt curbs sugar diversion for ethanol, mills warn of losses during surplus year
State-run oil marketing companies have excluded ethanol produced from sugarcane juice, sugar syrup and B-heavy molasses from their latest procurement tender for the 2026-27 supply year for petrol blending, prompting mills to urge the Centre to retain these feedstocks in future procurement cycles.
The Indian government has decided to procure mostly grain-based ethanol for its petrol blending programme this year, aiming to curb the diversion of sugarcane and encourage sugar production amid declining acreage and rising prices. State-run oil marketing companies have excluded ethanol derived from sugarcane juice, sugar syrup, and B-heavy molasses from their recent procurement tender for the 2026-27 supply year, prompting sugar mills to request the government to retain these feedstocks in future procurement cycles.
The exclusion, issued by BPCL on behalf of other OMCs on October 16, seeks bids for approximately 11 billion liters of ethanol to meet the 20% ethanol blending requirement. The tender only allows bids for ethanol from maize, broken rice, surplus rice procured by FCI, and C-heavy molasses. This shift in sourcing for ethanol-blended petrol stems from concerns over potential price rises and lower sugar production due to declining sugarcane acreage and the effects of El Niño.
The ISMA, a lobby group of sugar mills, voiced worries that continuing preferential procurement from Dedicated Ethanol Plants with long-term offtake agreements could limit sugar mills' participation in ethanol procurement tenders during surplus production seasons, ultimately harming their finances and ability to pay fair prices to sugarcane farmers.
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