The government has restricted oil companies from purchasing ethanol made from sugarcane juice, sugar syrup and B-heavy molasses to maintain adequate domestic sugar supplies and contain prices. The restriction will take effect on November 1, 2026, at the beginning of the new ethanol supply year.
The decision comes amid concerns that lower rainfall and a weak monsoon could affect sugarcane production, particularly in major producing states such as Maharashtra and Karnataka. A decline in sugarcane output could reduce sugar production and put upward pressure on domestic prices.
Government-owned oil marketing companies have issued a joint tender to procure approximately 11 billion litres of ethanol for the upcoming supply year. The tender excludes ethanol produced from sugarcane juice, sugar syrup and B-heavy molasses, while allowing supplies made from other approved raw materials.
Which Raw Materials Can Be Used for Ethanol?
Under the new tender, oil companies can procure ethanol produced from several alternative feedstocks, including:
- C-heavy molasses
- Damaged food grains
- Surplus rice purchased from the Food Corporation of India (FCI)
- Maize
- Other raw materials approved under the National Biofuel Policy
The restriction is intended to reduce the diversion of sugarcane towards ethanol production, leaving more of the crop available for sugar manufacturing.
Why Has the Government Taken This Decision?
India is among the world's major sugar producers, but it also has substantial domestic consumption. Any reduction in sugarcane output could tighten supplies and affect prices.
At the same time, the government has promoted ethanol blending with petrol to reduce dependence on imported crude oil and save foreign exchange. The latest restriction reflects the challenge of balancing ethanol blending targets with the need to maintain sufficient sugar supplies.
The government has also permitted sugar mills to sell sugar produced in October 2026 across October and November, in addition to their regular monthly sales quotas. This additional flexibility is intended to support market availability.
Impact on Sugar Mills and Consumers
The restriction could help keep more sugarcane available for sugar production, potentially supporting domestic supplies and limiting price pressures. However, sugar mills that depend on sugarcane juice and B-heavy molasses for ethanol may need to adjust their production plans.
They could explore permitted alternatives such as C-heavy molasses, maize and surplus rice to continue supplying ethanol to oil companies.
The overall impact will depend on sugarcane production, rainfall conditions, sugar demand and the availability of alternative ethanol feedstocks. The government’s decision seeks to balance domestic sugar availability with the country’s ongoing ethanol-blending programme.
For official policy information, visit the Ministry of Petroleum and Natural Gas.
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