New Delhi: The ethanol industry has backed the government’s approach to procurement for the 2026-27 ethanol supply year (ESY), but industry associations representing sugar mills and distilleries have sought higher procurement prices and greater flexibility, saying current rates could make production economically unviable.
This follows the ethanol procurement tender floated by Bharat Petroleum Corporation Ltd (BPCL) on behalf of state-run oil marketing companies on 16 October for ESY 2026-27. The tender covers about 1,100 crore litres of ethanol for the supply period from 1 November 2026 to 31 October 2027.
The Indian Sugar & Bio-Energy Manufacturers Association (ISMA) and All India Distillers’ Association (AIDA), in separate statements over the past two days, have supported the government’s attempt to balance ethanol production with food security and availability of sugarcane and other feedstocks.
Under the tender, the government has decided against allowing any diversion of sugar for ethanol during the 2026-27 supply year. This means OMCs will not procure ethanol made from sugarcane juice, sugar syrup or B-heavy molasses.
C-heavy molasses, maize, damaged foodgrains and surplus rice supplied by the Food Corporation of India (FCI) are among the feedstocks that can be used under the tender.
The move has raised concerns among sugar mills, which have increasingly relied on ethanol as an additional source of revenue, particularly during years of higher sugar production. The government, however, is seeking to protect domestic sugar availability amid concerns over the crop outlook and production in major sugar-producing states.
ISMA has welcomed the restriction, saying it will help protect domestic sugar supplies, but wants the government to ensure that the policy does not disadvantage sugar mills in future years.
The body seeks that the procurement price for C-heavy molasses-based ethanol be raised to Rs 62.23 per litre from Rs 57.97 per litre. It said the existing price is unchanged from last year even as the Fair and Remunerative Price (FRP) of sugarcane and costs of chemicals, labour, fuel and compliance have increased.
ISMA has also sought full allocation of the C-heavy molasses-based ethanol offered by sugar mills, saying this would help mills make better use of their distillery capacity and support timely payment of cane dues.
The association has also raised concerns over the preference given to dedicated ethanol plants under the current tender. It said this could hurt sugar mills in years when sugar production is high, as mills need to divert surplus sugar towards ethanol to avoid excess supply in the market.
“Sugarcane is a cyclical crop, and its availability and the resulting sugar production vary from season to season,” ISMA Director General Deepak Ballani said in a statement Monday. “In seasons of surplus sugar production, the diversion of surplus sugar towards ethanol is essential to prevent excess supply in the domestic market, which could depress sugar prices and ex-mill realisations.”
AIDA, meanwhile, has raised concerns over the economics of grain-based ethanol.
The distillers’ body has asked the government to reconsider the reduction in the incentive for maize-based ethanol from Rs 5.79 per litre to Rs 2.79 per litre, which brings the effective procurement rate down to Rs 68.86 per litre from Rs 71.86. It said the reduction puts pressure on the viability of grain-based distilleries.
AIDA has also sought an increase in the procurement price of ethanol made from surplus FCI rice. The current price of Rs 60.32 per litre, it said, leaves limited margins because of higher raw material, energy, chemical, processing and logistics costs.
“We request the government to consider a revision of the incentive and pricing structure for maize-based ethanol to ensure that production remains economically viable and investments in grain-based distilleries are sustained,” AIDA President Vijendra Singh said in a statement.
The demands come as India seeks to maintain its 20 percent ethanol blending target while building a diversified supply base using sugarcane, molasses, maize and surplus foodgrains.
For sugar mills, the immediate concern is better pricing and assured offtake for C-heavy molasses, while grain-based distillers are seeking higher prices and incentives for maize and FCI rice. Both associations have argued that better returns are needed to keep their ethanol plants running and encourage continued investment in production capacity.
Edited by Nivedita Patil
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