New Delhi: The government has restricted the purchase of ethanol made from sugarcane juice, sugar syrup and B-heavy molasses to ensure adequate sugar supplies in the domestic market and keep prices under control. The decision will take effect from November 1, 2026, at the start of the new ethanol supply year.
The move comes amid concerns that lower rainfall and a weak monsoon could affect sugarcane production this year, raising the risk of lower sugar output. By limiting the use of sugarcane for ethanol production, the government aims to ensure that more of the crop is available to make sugar.
Government-owned oil companies have issued a joint tender to purchase around 11 billion litres of ethanol for the new supply year. The companies include Indian Oil Corporation, Bharat Petroleum, Hindustan Petroleum, Numaligarh Refinery and Mangalore Refinery and Petrochemicals.
The tender does not invite offers for ethanol made from sugarcane juice, sugar syrup or B-heavy molasses. However, oil companies can continue to purchase ethanol produced from other approved raw materials.
Under the new tender, ethanol can be produced using C-heavy molasses, damaged food grains, surplus rice purchased from the Food Corporation of India and maize. Other raw materials approved under the National Biofuel Policy can also be used for ethanol production. The change is aimed at reducing the use of sugarcane for ethanol and making more of it available for sugar production.
India is one of the world's major sugar producers and also has high domestic consumption. Lower rainfall in key sugarcane-producing states such as Maharashtra and Karnataka could affect the crop and reduce sugar production, which could in turn put pressure on domestic sugar prices.
At the same time, the government has been encouraging ethanol blending with petrol to reduce dependence on crude oil imports and save foreign exchange. Ethanol can be produced using sugarcane juice, molasses and grains.
The government therefore faces the challenge of promoting ethanol blending while ensuring that enough sugar is available for domestic consumption. The latest restriction is intended to balance these two priorities by limiting the use of certain sugarcane-based raw materials for ethanol production.
The government has also allowed sugar mills to sell sugar produced in October 2026 during October and November, over and above their regular monthly sales quotas. For example, a mill that produces 1,000 metric tonnes of sugar in October can sell that quantity across October and November under the additional permission.
The move gives mills greater flexibility in planning their sales and is expected to support sugar availability in the domestic market. The restriction could help keep more sugarcane available for sugar production, supporting domestic supplies and helping contain prices.
However, it could also affect ethanol production and sales for sugar mills that rely on sugarcane juice and B-heavy molasses. These mills will need to explore other permitted raw materials, such as C-heavy molasses, maize and surplus rice, to continue supplying ethanol to oil companies.