The government has removed restrictions on ethanol production from sugarcane-based inputs for the 2025-26 season, aligning with the national goal of ethanol blending. However, despite policy support, sugar-based ethanol currently constitutes just 38% of the overall supply, with grains dominating the remainder.
As per data till July 2025, only 2.74 billion litres of the total 7.23 billion litres of ethanol supplied to oil marketing companies originated from sugar sources. This reflects a 38% share, with grains like rice and maize contributing the remaining 62%. If these proportions remain steady, sugar-based ethanol output could total approximately 3.7 billion litres by the end of Ethanol Supply Year 2025 (ESY25).
The removal of restrictions on using sugarcane juice, syrup, B-heavy and C-heavy molasses is expected to create greater production flexibility. This decision aligns with India's E20 rollout target, which envisages 20% ethanol blending with petrol across the nation. Sugar sector players welcomed the move, anticipating improved supply capabilities.
Despite increased production potential for sugar mills, grain-based ethanol continues to lead the market. Factors such as the absence of ethanol price revision for the last 2 years have impacted the sugar industry's profitability, making it less appealing to divert sugarcane for ethanol production without adequate economic incentives.
The upward revision of the Fair and Remunerative Price (FRP) of sugarcane has further compressed margins for producers using sugarcane juice or B-heavy molasses routes. Until ethanol prices are adjusted to support viable margins, sugar mills are likely to remain cautious with large-scale sugar diversion.
The government's ethanol policy reforms are a step toward reducing fossil fuel dependency and promoting energy sustainability. However, the dominance of grain-derived ethanol and challenges in sugar-based production highlight the need for broader pricing and input cost adjustments to fully realise the policy's impact.
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Published on: Sep 3, 2025, 4:06 PM IST
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