Central government halts sugar use for ethanol to protect domestic supplies

The central government has ordered a complete reduction in the amount of sugarcane diverted for making ethanol due to growing pressure on domestic sugar supplies. Public sector oil marketing companies issued a tender on October 16 that did not invite bids for ethanol produced from sugarcane juice, raw sugar, sugar syrup, and B-heavy molasses. Oil companies are looking for about 11 billion litres of ethanol for supply between November 2026 and October 2027. Instead of sugar-based raw materials, companies can use alternatives like maize, damaged food grains, Food Corporation of India surplus rice, and C-heavy molasses. Bad weather is the main reason behind this decision, as weather conditions in major sugarcane-growing states like Maharashtra and Karnataka are hitting crop yields. Sugar prices have already gone up significantly, so the government is keeping sugar available for home use instead of sending it to the fuel sector to keep supply steady in the coming season. However, the government noted that diverting sugar for ethanol is not the only reason for price hikes. In the 2025-26 period, the share of sugar sent for ethanol dropped to about 9 percent, and nearly three-fourths of the country's ethanol comes from grains.

Context

Balancing food supplies and fuel needs is a major task for the government when weather hits key crops. India has been increasing its use of ethanol mixed in fuel to cut down on crude oil imports, while also managing local food availability and prices.