Blitz Bureau
NEW DELHI: In a significant policy decision, the Centre has granted sugar mills and distilleries complete freedom to decide the feedstock for ethanol production during the 2025–26 supply year, beginning November. Factories will now be able to use sugarcane juice, sugar syrup, B-heavy molasses or C-heavy molasses without restrictions. The move comes amid projections of a bumper sugar output and is expected to help divert excess cane towards ethanol.
Government Oversight
The Department of Food and Public Distribution, in coordination with the Ministry of Petroleum and Natural Gas, will periodically review the diversion of sugar to ethanol to ensure that sufficient quantities of the sweetener remain available for domestic consumption. Officials said the policy balances the twin objectives of protecting consumers and sustaining the government’s biofuel blending programme.
Fixed Ethanol Prices
Oil marketing companies purchase ethanol at centrally fixed rates. At present, they pay ₹65.61 a litre for sugarcane juice or syrup, ₹60.73 for B-heavy molasses and ₹57.97 for C-heavy molasses. For grain-based ethanol, the price is ₹64 per litre for damaged foodgrains, ₹71.86 for maize and ₹58.50 for surplus rice supplied by the Food Corporation of India (FCI). From November 1, the reserve price of FCI rice sold to distilleries will be raised from ₹2,250 per quintal to ₹2,320 per quintal.
Sugar Surplus Forecast
The Indian Sugar and Bioenergy Manufacturers Association (ISMA) has forecast gross sugar production at 34.9 million tonnes for 2025–26, nearly 18 per cent higher than last year. To manage the surplus, ISMA has urged the government to permit exports of 2 million tonnes and divert another 5 million tonnes towards ethanol. If all available cane juice were to be channelled into biofuel, the industry would need to divert about 11 million tonnes of sugar equivalent.
Capacity and Blending Drive
India’s ethanol ecosystem has expanded rapidly in recent years. As of June 2025, the country had 499 distilleries with an annual capacity of about 1,822 crore litres. Between November 2024 and July 2025 alone, oil companies procured 722.7 crore litres. Blending levels have already climbed to nearly 19 per cent, compared with around 15 per cent in 2024, moving closer to the government’s target of 20 per cent blending (E20) by 2025–26. Earlier this year, the Supreme Court dismissed a petition challenging the E20 rollout, allowing nationwide implementation to proceed without legal hurdles.
Blitz View
Industry experts say the policy will help mills manage surplus stocks and provide better returns to farmers. However, they caution that large-scale diversion of cane juice could tighten sugar availability and push up retail prices. Concerns have also been raised over the political sensitivity of using FCI rice for fuel and the need to align ethanol procurement prices more closely with rising cane costs. Consumers, meanwhile, remain wary of the impact of E20 fuel on vehicle mileage.
The new policy underscores the government’s strategy of using flexibility as a tool to balance competing priorities. By empowering mills to choose their production pathway, India hopes to stabilise sugar markets, support farmer incomes and accelerate its shift towards clean energy.
