India has directed oil marketing companies to cut sugar diversion for ethanol production to zero in 2026/27, excluding ethanol made from sugarcane juice, sugar syrup and B-heavy molasses from their latest tender, according to a tender issued on Friday.
India has relied for years on surplus sugar to meet its ethanol-blending targets, but the exclusion of sugar-based feedstocks underscores the growing tension between cutting oil imports and protecting domestic sugar supplies, as poor rainfall threatens output and pushes prices to record highs.
"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 said.
The oil marketing companies invited bids for 11 billion litres of ethanol for the supply year beginning in November.
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The tender allows manufacturers to bid for ethanol made from corn, broken rice and surplus rice procured by the Food Corporation of India, according to the document jointly issued by state-run Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp.
The world's biggest sugar consumer has been trying to boost domestic sugar production and bring down record-high prices.
The government made E20 the nationwide mandatory standard earlier this year, to curb pollution and cut oil imports, but some motorists fear the blend could damage older vehicles.
The companies cut the incentive for corn-based ethanol to 2.79 rupees per litre from 5.79 rupees, bringing the procurement price down to 68.86 rupees per litre from 71.86 rupees, according to the tender.
In August, Reuters reported that India was considering restricting the amount of sugarcane used for ethanol in the season beginning October to boost sugar output and try to calm record prices after reduced rainfall in Maharashtra and Karnataka raised concerns about this year's sugar output.