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.