Sugar-Based Ethanol Barred from 2026–27 Fuel-Blending Tender
State-run Oil Marketing Companies (OMCs) have excluded ethanol produced from sugarcane juice, sugar syrup and B-heavy molasses from the 2026–27 ethanol procurement tender.
What Has Changed?
- The government has directed that sugar diversion for ethanol be reduced to zero for 2026–27.
- OMCs have sought around 11 billion litres of ethanol for the supply year beginning in November.
- No bids have been invited for ethanol produced from sugarcane juice/syrup or B-heavy molasses.
Feedstocks Still Allowed
- Ethanol can continue to be supplied from: Maize , Broken rice ,Surplus rice procured by FCI and C-heavy molasses
- The change therefore shifts the Ethanol Blending Programme increasingly towards grain-based feedstocks.
Maize-Based Ethanol
- The procurement price for maize-based ethanol has been reduced to ₹68.86 per litre from ₹71.86 per litre.
- The additional incentive for maize-based ethanol has also been reduced, lowering returns for producers.
Why Has the Government Taken This Step?
- Poor rainfall in major sugar-producing States has raised concerns over lower sugar output and rising domestic prices.
- Diverting sugarcane to ethanol during a supply shortage could reduce sugar available for food consumption.
- The government is therefore balancing energy-security objectives with food and price security.
Ethanol Blending Programme
- India has adopted E20 petrol, containing up to 20% ethanol, as the nationwide blending standard.
- Ethanol blending aims to:
- Reduce crude-oil import dependence.
- Lower vehicular emissions.
- Promote domestic production of alternative fuels.
Impact
- Grain-based ethanol is likely to become more important in meeting E20 requirements.
- Ethanol production will increasingly depend on availability and prices of maize and rice feedstocks.
- Distillery capacity and feedstock supply will become crucial for maintaining the 20% blending target.
While grain-based ethanol can reduce pressure on sugar supplies, greater use of foodgrains for fuel may create its own food-versus-fuel and price concerns if agricultural output is constrained.
The 2026–27 ethanol policy temporarily prioritises domestic sugar availability over sugar-based ethanol production, while shifting the burden of India’s E20 programme towards grain-based and C-heavy molasses ethanol.