India Excludes Sugar-Based Ethanol from 2026-27 Procurement
The Indian government has revised its ethanol sourcing strategy, removing sugar-based options to prioritize domestic sugar supply.
Oil companies will no longer procure sugar-based ethanol for 2026-27.
Ethanol from maize and other grains will now be prioritized, with a price cut for maize producers.
The change aims to balance domestic sugar needs with the ethanol blending program.
In a significant shift in policy, the Indian government has announced that oil marketing companies (OMCs) will no longer source ethanol derived from sugar-based materials for the procurement period of 2026-27. This decision, communicated through a tender issued on October 16, aims to ensure that more sugar remains available for domestic consumption while maintaining the country's ethanol blending program with petrol.
The tender, which invites bids for approximately 11 billion liters of ethanol for the period from November 2026 to October 2027, aligns with India's goal of blending 20% ethanol into petrol. The government directive explicitly states that no offers will be accepted for ethanol produced from sugarcane juice, sugar syrup, or B-heavy molasses, as part of its strategy to mitigate concerns regarding sugar supply and rising prices amid adverse weather conditions affecting key sugar-producing states like Maharashtra and Karnataka.
With the exclusion of sugar-based ethanol, oil companies are now permitted to procure ethanol derived from maize, broken rice, surplus rice from the Food Corporation of India (FCI), and C-heavy molasses. However, the procurement price for maize-based ethanol has been reduced from Rs 71.86 to Rs 68.86 per liter, alongside a decrease in the incentive from Rs 5.79 to Rs 2.79 per liter. This adjustment means that producers will face tighter margins while the demand for grain-based ethanol rises in response to the new procurement guidelines.
The government's decision is rooted in the need to balance domestic sugar availability with the ongoing efforts to reduce reliance on imported crude oil and lower emissions. As the world's largest sugar consumer, India has been leveraging ethanol blending to address its energy needs. However, the diversion of sugar for ethanol production can exacerbate food supply concerns, particularly when sugar output is threatened by unfavorable weather conditions.
Looking ahead, the transition to grain-based ethanol production will be crucial for meeting the ethanol requirements during the 2026-27 supply year. The availability of raw materials, adjusted procurement prices, and the capacity of distilleries will play a vital role in ensuring that the ethanol blending program continues to function effectively, even as the raw material sources undergo significant changes.
