The government has imposed restrictions on the procurement of ethanol derived from sugarcane juice, sugar syrup, and B-heavy molasses. This decision aims to maintain sufficient sugar supplies in the domestic market and manage price stability. The regulations will come into effect on November 1, 2026, coinciding with the beginning of the new ethanol supply year.

This initiative arises from concerns regarding the potential impact of reduced rainfall and a weak monsoon on sugarcane production in the current year. Such conditions could lead to diminished sugar output, prompting the government to limit sugarcane use for ethanol production. The objective is to ensure that a larger portion of the sugarcane crop is allocated for sugar manufacturing.

State-owned oil companies have collectively issued a tender to acquire approximately 11 billion litres of ethanol for the forthcoming supply year. This consortium includes major players such as Indian Oil Corporation (IOCL), Bharat Petroleum (BPCL), Hindustan Petroleum (HPCL), Numaligarh Refinery, and Mangalore Refinery and Petrochemicals. Notably, the tender excludes offers for ethanol sourced from sugarcane juice, sugar syrup, or B-heavy molasses.

Permitted Raw Materials for Ethanol Production

Under the new guidelines, ethanol can be produced using C-heavy molasses, damaged food grains, surplus rice procured from the Food Corporation of India (FCI), and maize. The regulations also permit the use of other raw materials that have been sanctioned under the National Biofuel Policy for ethanol production. This shift is designed to decrease reliance on sugarcane for ethanol, thereby increasing its availability for sugar production.

The government’s decision reflects its dual objectives of promoting ethanol blending with petrol to reduce dependence on crude oil imports while ensuring adequate sugar supply for domestic consumption. India is a significant player in the global sugar market, with high domestic demand. Concerns about lower rainfall in key sugarcane-producing states, such as Maharashtra and Karnataka, could jeopardise crop yields and, subsequently, sugar production.

As a result, the government faces the challenge of balancing the promotion of ethanol blending with the necessity of maintaining sufficient sugar supplies. The latest restrictions are intended to reconcile these competing priorities by limiting the use of specific sugarcane-based raw materials for ethanol production.

Implications for Sugar Mills

The newly introduced restrictions are expected to help retain more sugarcane for sugar manufacturing, thereby supporting domestic supplies and assisting in price control. However, this could also adversely affect ethanol production for sugar mills that depend on sugarcane juice and B-heavy molasses. These mills will need to seek alternative raw materials, such as C-heavy molasses, maize, and surplus rice, to continue fulfilling their ethanol supply obligations to oil companies.

Additionally, the government has permitted sugar mills to sell sugar produced in October 2026 during the months of October and November, beyond their standard monthly sales quotas. For instance, a mill producing 1,000 metric tonnes of sugar in October will be allowed to sell that quantity over both October and November under this additional provision.

This flexibility is anticipated to enhance the planning capabilities of sugar mills and is expected to contribute positively to the availability of sugar in the domestic market. Overall, the government’s measures aim to navigate the complexities of sugar and ethanol production while addressing the needs of both sectors effectively.

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