Key Highlights

  • Procurement halted: The Centre has directed state-owned fuel retailers to stop buying ethanol made from sugarcane juice, sugar, sugar syrup and B-Heavy molasses.
  • Effective November 1: The change applies from the new ethanol supply year starting November 1.
  • 11 billion litres sought: IOCL, BPCL, HPCL, Numaligarh Refinery and MRPL have floated a joint tender for nearly 11 billion litres of ethanol.
  • Grains and C-heavy molasses allowed: Suppliers can offer ethanol from C-heavy molasses, damaged food grains, surplus FCI rice, corn and other permitted feedstocks.
  • Extra sugar sales: Mills can sell sugar produced in October 2026 during October and November, over and above regular monthly quotas.

India’s ethanol story has hit a speed bump, and this time the reason is the weather. With a weak monsoon denting sugarcane output, the Centre has directed state-owned fuel retailers to stop procuring ethanol made from sugar and key sugarcane-based feedstocks, in a move aimed at keeping sugar prices in check.

What the Tender Says

The direction will take effect from the new supply year starting November 1, according to the tender document. Public sector refiners Indian Oil Corp Ltd (IOCL), Bharat Petroleum Corp Ltd (BPCL), Hindustan Petroleum Corp Ltd (HPCL), Numaligarh Refinery Ltd and Mangalore Refinery and Petrochemicals Ltd have issued a joint tender seeking nearly 11 billion litres of ethanol for the year, citing the new government directions.

“No offers have been sought for ethanol produced from sugarcane juice, sugar, sugar syrup and B-Heavy molasses in this quantity bid tender,” the document states.

What Suppliers Can Still Offer

Suppliers can offer ethanol produced from C-heavy molasses, damaged food grains, surplus rice procured from the Food Corporation of India, corn and other feedstocks permitted under the National Policy on Biofuels.

Why the Government Acted

India, the world’s second-biggest sugar producer, faces a smaller crop than a year earlier after El Nino contributed to the weakest monsoon in more than a decade. Diverting cane to ethanol at such a time could tighten domestic sugar supplies and push up prices, especially in the festive season when demand peaks.

More Sugar for the Market

Alongside the ethanol move, the government has allowed sugar mills to sell sugar produced in October 2026 during October and November 2026, over and above regular monthly release quotas. As per the order, if a mill produces 1,000 MT of sugar in October, it may sell that quantity during October and November in addition to its regular quota.

Why It Matters

India has increasingly used sugarcane and grains to produce ethanol to reduce its dependence on imported oil. The government had brought forward its target of 20 per cent ethanol blending in petrol by five years and achieved it in 2025.

The latest decision shows how policymakers are balancing two priorities: fuel security on one side and food price stability on the other. In a normal year, cane-based ethanol offers mills an attractive revenue stream. In a weak year, the government has chosen to put the kitchen ahead of the fuel tank.

Industry Impact

The move is likely to shift the burden of ethanol supply towards grain-based distilleries using corn, surplus rice and damaged grains. For sugar mills that had invested in ethanol capacity, the shift could mean lower revenue from diversion this season, though the additional freedom to sell October output may offer some relief.

What Comes Next

Industry participants will now watch how much of the 11-billion-litre requirement grain-based producers can meet, and whether the government revisits the curbs if cane output turns out better than expected later in the season.