India Halts Sugarcane-Based Ethanol Production for 2026-27, Seeks 11 Billion Litres From Alternative Sources

India has halted sugarcane-based ethanol procurement for 2026-27 amid concerns over sugar supplies and rising prices, while oil companies seek 11 billion litres from alternative feedstocks.

India Restricts Sugar Diversion for Ethanol Production in 2026-27

India has directed oil marketing companies (OMCs) to stop procuring ethanol produced from sugarcane-based feedstocks for the 2026-27 supply year. The decision aims to protect domestic sugar availability as concerns grow over production levels and rising prices.

According to a tender issued on Friday, ethanol manufactured from sugarcane juice, sugar syrup and B-heavy molasses has been excluded from the latest procurement process, Business Standard reported.

The move highlights the challenge of balancing India's ethanol-blending ambitions with the need to maintain sufficient sugar supplies for domestic consumption.

Poor Rainfall Raises Concerns Over Sugarcane Output

Unfavourable rainfall in Maharashtra and Karnataka has raised concerns about sugarcane production and the availability of sugar in the upcoming season.

With the possibility of tighter supplies, the government has moved to limit the use of sugarcane-derived products for ethanol manufacturing. The measure is intended to prioritise sugar production and help maintain domestic market availability.

Oil Marketing Companies Invite Bids for 11 Billion Litres of Ethanol

State-run Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) have jointly invited bids for 11 billion litres of ethanol for the supply year beginning in November.

The tender allows suppliers to offer ethanol produced from alternative feedstocks, including:

• Corn

• Broken rice

• Surplus rice procured through the Food Corporation of India (FCI)

However, ethanol manufactured from sugarcane juice, sugar, sugar syrup and B-heavy molasses is excluded from the procurement process.

Shift Towards Grain-Based Ethanol

India has traditionally used surplus sugarcane-derived feedstocks to support its ethanol-blending programme. The latest restrictions are expected to increase the importance of grain-based alternatives in meeting fuel requirements.

By encouraging procurement from corn and rice, the oil companies can continue sourcing ethanol while the government seeks to protect sugar supplies.

The policy also reflects the difficulties of managing competing demands for agricultural commodities, particularly when weather conditions affect crop production.

Government Reduces Incentive for Corn-Based Ethanol

Alongside the restriction on sugarcane-based ethanol, the oil marketing companies have lowered the incentive offered for corn-based ethanol procurement.

Under the latest tender, the incentive has been reduced from ₹5.79 per litre to ₹2.79 per litre. As a result, the procurement price has declined from ₹71.86 per litre to ₹68.86 per litre.

The reduction comes as the government adjusts ethanol procurement arrangements to address changing feedstock priorities and domestic supply requirements.

Although corn remains an eligible source of ethanol under the tender, the lower incentive could affect supplier economics and decisions about feedstock allocation.

India Continues Its E20 Ethanol-Blending Programme

India introduced mandatory nationwide E20 petrol blending earlier in 2026. The programme requires petrol to contain 20% ethanol and is intended to reduce dependence on imported crude oil while helping limit pollution.

The blending target has created substantial demand for ethanol, requiring oil marketing companies to secure supplies from different agricultural sources.

However, the programme has also generated concerns among some motorists about the compatibility of ethanol-blended petrol with older vehicles.

The latest procurement decision shows how the government is attempting to continue its biofuel strategy while responding to domestic agricultural and sugar-market pressures.

Policy Follows Earlier Concerns Over Sugarcane Diversion

In August, Reuters reported that India was considering restrictions on the use of sugarcane for ethanol production during the season beginning in October.

The latest tender puts the restriction into effect for the 2026-27 supply year by excluding specified sugarcane-based feedstocks from procurement.

The decision places greater emphasis on alternative agricultural inputs as India seeks to meet ethanol demand without putting additional pressure on sugar availability.

What the Decision Means for India's Ethanol Market

The restriction could reshape procurement patterns in India's ethanol industry during the coming supply year. Corn and rice-based ethanol will remain important alternatives as oil marketing companies seek to meet their large-volume requirements.

At the same time, the reduction in the corn-based ethanol incentive may influence suppliers' production costs and commercial decisions.

The overall impact will depend on the availability and pricing of alternative feedstocks, as well as developments in sugarcane production and domestic sugar demand.

Conclusion

India's decision to halt procurement of sugarcane-based ethanol for 2026-27 reflects its effort to protect domestic sugar supplies while maintaining its ethanol-blending programme. With oil companies seeking 11 billion litres from alternative sources, grain-based ethanol is set to play a significant role in the country's fuel supply strategy.