State-run oil marketing companies have barred ethanol made from sugarcane juice, sugar syrup and B-heavy molasses from their latest procurement tender for the 2026-27 supply year for blending in petrol, as the government seeks to protect domestic sugar supplies while sustaining its nationwide petrol-blending programme.
The tender, issued on October 16 by Bharat Petroleum Corporation Ltd (BPCL) on behalf of oil marketing companies (OMCs), seeks bids for around 11 billion litres of ethanol for the supply year beginning November to meet the requirement of doping 20 per cent ethanol in petrol. It also cuts the incentive for maize-based ethanol, lowering the procurement price to Rs 68.86 per litre from Rs 71.86.
"The Government of India has issued directions that sugar diversion for ethanol be reduced to zero for ethanol supply year 2026-27," the tender document said.
"No offers have been sought for ethanol produced from sugarcane juice, sugar or sugar syrup and B-heavy molasses in this quantity bid tender," it added.
The restrictions mark a shift in feedstock sourcing for the ethanol-blended petrol programme, which has relied on both grain-based and sugarcane-based ethanol to reduce crude oil imports and cut vehicle emissions.
The tender allows bids for ethanol produced from maize, broken rice, surplus rice procured by the Food Corporation of India (FCI) and C-heavy molasses, according to the document.
The reduction in the maize incentive to Rs 2.79 per litre from Rs 5.79 is expected to lower returns for producers supplying ethanol from the grain, even as the exclusion of sugar-based feedstocks increases the importance of alternative raw materials.
The move comes amid concerns over domestic sugar availability and rising prices after poor rainfall in key sugar-producing states, including Maharashtra and Karnataka, raised the risk of lower output.
India, the world's largest sugar consumer, has increasingly used ethanol blending to reduce its dependence on imported crude oil. However, diverting sugarcane and sugar for fuel production can compete with supplies available for food consumption, particularly when output is constrained.
The latest tender underscores the government's effort to balance its energy-security objectives with the need to maintain adequate sugar supplies and contain domestic prices.
India has adopted petrol containing up to 20 per cent ethanol, known as E20, as the nationwide standard as part of efforts to reduce oil import dependence and emissions.
Ethanol is produced from agricultural feedstocks, including sugarcane and grains, and blended with petrol to displace a portion of fossil fuel consumption. The programme has created a substantial market for domestic distilleries while offering farmers an additional source of demand for agricultural produce.
The shift away from sugar-based ethanol in the 2026-27 procurement cycle is likely to increase the importance of grain-based production and make feedstock availability, procurement prices and distillery capacity key factors in meeting blending requirements.
The procurement tender covers the ethanol supply year from November 2026 to October 2027.