India Halts Sugar-Based Ethanol Procurement From November 1 as Weak Monsoon Hits Sugarcane Output

The Centre has directed state-owned oil marketing companies to stop procuring ethanol made from sugar and key sugarcane-based feedstocks for the 2026-27 supply year, starting November 1, as concerns over lower sugarcane output and rising sugar prices prompt the government to prioritise domestic sugar supplies. The decision excludes ethanol produced from sugarcane juice, sugar, sugar syrup and B-heavy molasses from the latest procurement tender.

Five public sector refiners — Indian Oil Corporation (IOCL), Bharat Petroleum Corporation (BPCL), Hindustan Petroleum Corporation (HPCL), Numaligarh Refinery Limited and Mangalore Refinery and Petrochemicals Limited — have jointly invited bids for nearly 11 billion litres of ethanol for the upcoming supply year, according to the tender document cited by IANS. India’s Ethanol Supply Hits 895 Crore Litres in August; Grains Contribute Nearly 70 Pc: Report.

The move comes as India, the world's second-largest sugar producer, faces the prospect of a smaller sugar crop following a weak monsoon. The government aims to protect domestic availability of sugar while continuing ethanol procurement through alternative feedstocks.

Sugar-Based Ethanol Excluded From New Tender

The latest tender does not invite offers for ethanol manufactured from sugarcane juice, sugar, sugar syrup or B-heavy molasses. These feedstocks can otherwise be used to produce ethanol, diverting some sugarcane resources away from sugar production. Instead, suppliers can offer ethanol produced from C-heavy molasses, damaged food grains, surplus rice procured by the Food Corporation of India (FCI), corn and other feedstocks permitted under the National Policy on Biofuels.

The shift is intended to help preserve sugar supplies for domestic consumption at a time when weaker crop prospects and higher prices have raised concerns over availability. Bharat Ethanol Forum 2026 Concludes in Mumbai: Policymakers and Industry Chart India's Road Beyond E20.

Weak Monsoon Raises Concerns Over Sugar Production

India's sugar output outlook has been affected by unfavourable weather conditions, with El Niño contributing to a weak monsoon and reduced rainfall in important sugar-producing regions. Maharashtra and Karnataka have been among the states facing rainfall-related concerns for sugarcane production. Lower production can tighten domestic sugar availability and put upward pressure on prices. By restricting the use of sugar-based feedstocks for ethanol, the government is seeking to make more sugarcane available for sugar production rather than fuel manufacturing.

Government Allows Additional Sugar Sales

Alongside the ethanol procurement restrictions, the government has permitted sugar mills to sell sugar produced in October 2026 during October and November, over and above their regular monthly release quotas. Under the arrangement, a mill producing 1,000 metric tonnes of sugar in October can sell that quantity during the two months in addition to the quantities allocated under its regular monthly quotas. The measure is intended to improve the availability of sugar in the domestic market during the new season.

Ethanol Blending Target Remains a Key Policy Priority

India has expanded ethanol blending in petrol to reduce dependence on imported crude oil and support the use of domestically produced biofuels. The government had advanced its target of achieving 20% ethanol blending in petrol by five years and reached the goal in 2025, according to the IANS report.

The latest procurement policy shifts demand towards grain-based ethanol and other permitted alternatives while limiting the diversion of sugarcane for fuel production. The move reflects the government's effort to balance its biofuel programme with the need to maintain adequate sugar supplies and manage domestic prices.

(The above story first appeared on LatestLY on Oct 17, 2026 04:24 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).