Business · India Bureau
India halts sugar-based ethanol procurement as domestic supplies tighten
The central government has directed oil marketing companies to cease purchases of sugar-derived ethanol for the 2026-27 financial year, prioritizing domestic sugar availability as prices remain elevated. The decision reflects growing concerns over India's sugar stocks and domestic consumption needs.
LSN India ·
India's petroleum ministry has instructed oil marketing companies to set sugar diversion for ethanol production at zero in their 2026-27 tender, effectively halting procurement of sugar-based biofuel for the upcoming fiscal year. The directive marks a significant shift in India's ethanol blending programme, which has previously relied on surplus sugar production to meet fuel blending mandates.
The move comes against the backdrop of tight domestic sugar supplies and elevated price levels in the Indian market. Policymakers have grown increasingly concerned about diverting sugarcane-derived materials away from domestic consumption and exports, particularly as sugar availability remains constrained.
India's ethanol programme, which mandates blending of biofuels with petrol to reduce fossil fuel dependence, has traditionally utilised surplus sugar and molasses as feedstock. By zeroing out sugar-based ethanol procurement, the government is signalling its intention to source alternative feedstocks or reduce ethanol blending requirements in the coming year.
The decision is expected to provide some relief to India's domestic sugar sector by ensuring greater availability for direct consumption and export commitments. Sugar prices in India have remained elevated compared to historical averages, driven by global demand and domestic supply constraints.