Sugar Industry Seeks Ethanol Price Revision As Blending Share Drops To 28%

The sugar industry has demanded a revision of ethanol procurement prices and extension of blending targets beyond 20%, as the sector's contribution to the national ethanol programme has declined sharply from 73% to just 28%.

The industry has also demanded accelerated promotion and manufacturing of Flex-Fuel Vehicles or FFVs to boost ethanol demand and ensure market preparedness for higher blending, National Federation of Cooperative Sugar Factories or NFCSF said in a statement.

The demand was made by the industry delegation, led by Ravi Gupta, Chairman of IFGE's Sugar Bioenergy Group, and expert Member on the Board of NFCSF, in a meeting held at the Prime Minister's Office recently, it said.

In 2022-23 season (October-September), NFCSF said the sugar industry reached a significant milestone by diverting 43 lakh tonne of sugar towards ethanol production, enabling the supply of 369 crore litres of ethanol, which accounted for 73% of total ethanol blended with fuel across the country.

However, in 2023-24, ethanol supply from sugar-based feedstocks declined to 270 crore litres, contributing only 38% to the national blending programme. "This is projected to fall further to 250 crore litres in 2024-25, making up just 28% of the total blending target of 900 crore litres," it said in a statement.

The main reason for this drop is that ethanol procurement prices have not been increased in line with the rise in the Fair and Remunerative Price or FRP of sugarcane, making ethanol production less profitable for sugar mills.

Although there is potential to divert up to 40 lakh tonne of sugar into ethanol this year, only 32 lakh tonne are expected to be diverted.

"This shortfall is due to the gap between ethanol prices and better returns from selling sugar directly in the domestic market," NFCSF said.

As a result, India's ethanol production capacity of 952 crore litres per year -- including 130 crore litres from multi-feed distilleries -- is being under-utilised.

The Ethanol Blending Programme has emerged as a vital solution to the longstanding issue of surplus sugar stocks under the National Policy on Biofuels – 2018, which set an ambitious target to divert 60 to 70 lakh tonne of excess sugar annually towards ethanol production.

Since the policy's inception, India's ethanol production capacity has expanded significantly from 518 crore litre in 2018 to 1,800 crore litre in 2025. Correspondingly, the ethanol blending rate with petrol has risen sharply from 4.22% to 18.61% as of April 30, 2025.

Sugar production has reached 286.9 lakh tonne as on April 30 of the ongoing 2024-25 season, out of which 30 lakh tonne have been diverted for ethanol.

The industry has additionally suggested evaluating the possibility of blending ethanol in diesel as a future strategy to expand ethanol use across fuel types.

NFCSF noted that diverting sugar to ethanol does not reduce the actual production of sugar but helps to manage surplus sugar stocks, stabilise market prices, improve the financial health of sugar mills, and ensure timely payments to farmers.