India has announced a significant change in its ethanol procurement strategy for the 2026-27 supply year, excluding sugar-based ethanol from its latest tender. This decision, driven by concerns over domestic sugar availability and rising prices, comes after poor rainfall in major sugar-producing states like Maharashtra and Karnataka.
The tender, issued on October 16 by Bharat Petroleum Corporation Limited (BPCL) on behalf of oil marketing companies, seeks bids for approximately 11 billion litres of ethanol. The supply year begins in November, with the goal of blending 20% ethanol in petrol. Notably, the government has directed that no ethanol offers be made from sugarcane juice, sugar syrup, and B-heavy molasses.
Instead, the tender invites bids for ethanol produced from alternative sources such as maize, broken rice, surplus rice procured by the Food Corporation of India, and C-heavy molasses. This marks a shift in feedstock sourcing for the ethanol-blended petrol programme, which has traditionally relied on both grain-based and sugarcane-based ethanol to reduce crude oil imports and cut vehicle emissions.
In a move that could affect maize-based ethanol producers, the government has also reduced the procurement price for maize-based ethanol to ₹68.86 per litre from ₹71.86. This reduction in the maize incentive is expected to lower returns for producers, even as the exclusion of sugar-based feedstocks increases the importance of alternative raw materials.
The decision to exclude sugar-based ethanol comes amid concerns over domestic sugar availability and rising prices. India, the world's largest sugar consumer, has increasingly used ethanol blending to reduce its dependence on imported crude oil. However, diverting sugarcane and sugar for fuel production can compete with supplies available for food consumption, particularly when output is constrained.
The latest tender reflects the government's effort to balance its energy-security objectives with the need to maintain adequate sugar supplies and contain domestic prices. India has adopted petrol containing up to 20% ethanol, known as E20, as the nationwide standard as part of efforts to reduce oil import dependence and emissions.
Ethanol is produced from agricultural feedstocks, including sugarcane and grains, and blended with petrol to displace a portion of fossil fuel consumption. The programme has created a substantial market for domestic distilleries while offering farmers an additional
The shift away from sugar-based ethanol in the 2026-27 procurement cycle is likely to increase the importance of grain-based production. Feedstock availability, procurement prices, and distillery capacity will become key factors in meeting blending requirements.
The procurement tender covers the ethanol supply year from November 2026 to October 2027. As India navigates these changes, the focus will be on ensuring a steady supply of ethanol while managing the delicate balance between energy needs and food security.
