Indian Food Ministry asks States to ensure no sugar is diverted for ethanol
Diversion may not be allowed the entire supply year even as the Centre extends duty-free imports of raw sugar until December 31,
The Indian Food Ministry has written to all sugar mills, instructing them that ethanol production from sugarcane juice and B-heavy molasses is prohibited during the upcoming Ethanol Supply Year (ESY) 2026-27, which runs from November 2026 to October 2027. The ministry informed secretaries of the excise department in all sugar-producing states about the ban.
It also requested state officials to issue instructions to relevant authorities to ensure strict compliance with the decision. The government has been addressing a sugar shortage in the 2025-26 season, and a similar shortage is expected in 2026-27. In response, the government allowed duty-free import of 10 lakh tonnes of raw sugar in August, but only about 8 lakh tonnes were permitted.
The Directorate General of Foreign Trade (DGFT) has extended the validity of import permits till December 31, 2026. About 3-4 lakh tonnes of sugar quota has been surrendered by traders, but this has not been officially confirmed. Maharashtra has 70 sugar mills that have begun crushing operations despite lower recovery rates, producing 1.25 lakh tonnes of sugar so far.
The government has allowed these mills to sell the produced sugar at any time between October and November, without needing permission, and this quantity will be in addition to the monthly quota. However, traders claim that mills are selling sugar from their unsold stock of the previous season, and the upcoming November quota will need to account for the sugar produced in October.
Starting crushing operations in Uttar Pradesh has been a challenge due to low recovery rates, which many mills are unwilling to risk financially.
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