India to Ban Sugarcane Juice Diversion for Ethanol in 2026-27
The Indian government plans to prohibit the diversion of sugarcane juice and B-heavy molasses for ethanol production in the upcoming ethanol supply year.
The government aims to ensure adequate domestic sugar supplies amid production shortfalls.
Sugar production is projected to decline due to adverse weather in key states.
Ethanol production from sugarcane has decreased significantly, with grains now being the primary source.
The Indian government is poised to implement a ban on the diversion of sugarcane juice, syrup, and B-heavy molasses for ethanol production starting in the 2026-27 ethanol supply year, which begins on November 1. This decision comes in response to an estimated 11% shortfall in sugar production for the 2025-26 season, attributed to drought conditions affecting major sugarcane-producing states, particularly Maharashtra and Karnataka.
Historically, the sugar season in India runs from October 1 to September 30, while the ethanol supply year spans from November 1 to October 31. The government regulates the amount of sugarcane products that can be allocated for ethanol to meet blending targets for petrol. In the previous sugar season, approximately 30 lakh tonnes of sugar, or about 10% of total production, were diverted for ethanol, leading to tight domestic sugar supplies.
As the new sugar season commenced on October 1, mills began with an opening stock of around 37.5 lakh tonnes, a decrease from nearly 50 lakh tonnes the previous year. Industry insiders indicate that there is no room for further diversion of sugarcane products for ethanol, as maintaining sufficient domestic sugar availability is a priority for both the government and sugar mills. The ban on diversion is expected to allow mills to focus on sugar production, thereby enhancing domestic supply to meet consumption needs.
The government's decision to halt the use of sugarcane juice and B-heavy molasses for ethanol in the upcoming supply year is aimed at increasing sugar output from available cane. This strategy is crucial, given that sugar production in the 2025-26 season has been adversely affected by crop diseases and unfavorable weather conditions. Initial production estimates of around 343 lakh tonnes have been revised down to approximately 306 lakh tonnes, including the quantity diverted for ethanol.
Looking ahead, industry analysts believe that meeting the demand for 20% ethanol blending in petrol will not pose a challenge. With millers expected to receive better prices, the situation appears manageable. However, the government may need to maintain export bans and consider increasing imports to stabilize the market. The decline in sugar production has raised concerns about meeting the normative domestic consumption requirement of 280-285 lakh tonnes, especially after accounting for ethanol diversion.
