India has set sugar diversion for ethanol production at zero for the 2026-27 ethanol supply year, excluding sugarcane juice, sugar syrup and B-heavy molasses from the latest procurement tender issued by state-owned oil marketing companies (OMCs). The decision comes amid concerns over domestic sugar availability, weaker production prospects and rising prices, as the government seeks to balance its ethanol blending programme with the need to maintain adequate sugar supplies.
Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation issued the tender on October 16, inviting bids for 11 billion litres of ethanol for the supply year beginning in November 2026. Under the revised procurement framework, suppliers can offer ethanol produced from corn, broken rice and surplus rice procured by the Food Corporation of India (FCI). Sugar-based feedstocks have been excluded from the latest tender. 
The move marks a shift in India's ethanol procurement strategy. Sugarcane juice, sugar syrup and B-heavy molasses have previously contributed to ethanol production, helping the country reduce crude oil imports and support domestic fuel blending. However, concerns over sugar output have prompted the government to prioritise alternative feedstocks for the 2026-27 supply year.
Poor rainfall in key sugar-producing states, including Maharashtra and Karnataka, has raised concerns about sugarcane availability and production prospects. The possibility of tighter domestic supplies and higher prices has increased pressure to limit the diversion of sugarcane-derived products towards fuel production.
The tender has also reduced the incentive for corn-based ethanol to ₹2.79 per litre from ₹5.79 per litre. As a result, the procurement price has fallen to ₹68.86 per litre from ₹71.86 per litre. The revised rates could affect the economics of corn-based ethanol production, with the final impact depending on grain prices, feedstock availability and processing costs.
With sugar-based ethanol excluded, corn, broken rice and surplus FCI rice are expected to play a more significant role in meeting procurement requirements. However, greater reliance on grain-based feedstocks also raises questions about agricultural demand, feedstock costs and the availability of supplies for competing uses.
India has expanded ethanol blending to reduce dependence on imported crude oil and support cleaner transport fuels. The nationwide E20 standard, comprising 20% ethanol and 80% petrol, became mandatory in 2026. The latest tender highlights the challenge of sustaining ethanol blending targets while balancing fuel security, sugar availability and the interests of farmers, distilleries and consumers.
