India has prohibited the use of sugar for ethanol manufacturing during the 2026-27 supply year, seeking to shore up domestic availability and contain record-high retail prices as inadequate rainfall raises concerns over sugar production, Reuters reported.
According to the tender document , the government has instructed oil marketing companies to eliminate sugar-based ethanol procurement for 2026-27, leaving ethanol derived from sugarcane juice, sugar syrup and B-heavy molasses outside the latest bidding process.
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India has traditionally used excess sugar production to meet the feedstock requirements of its ethanol-blending initiative.
The new restrictions reflect the challenge of advancing the country's clean-fuel goals and lowering crude oil import dependence while maintaining sufficient sugar stocks to meet domestic demand.
The three state-run oil marketing companies — Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation — have invited bids for 11 billion litres of ethanol for the supply year beginning November 2026, Reuters reported.
Under the tender, manufacturers can offer ethanol produced from corn, broken rice and surplus rice procured by the Food Corporation of India.
The exclusion of sugar-based feedstocks is intended to limit the use of sugarcane for ethanol and leave more of the crop available for sugar production.
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India, the world's largest sugar consumer, has been seeking to increase domestic production and ease pressure on prices.
Poor rainfall in Maharashtra and Karnataka, two major sugar-producing states, has raised concerns about sugarcane availability and the outlook for production in the ongoing season.
Reuters had reported in August that the government was considering restrictions on the use of sugarcane for ethanol production to boost sugar output and help bring prices under control.
The decision comes as India continues to expand its ethanol-blending programme to reduce oil imports and curb vehicular pollution, the report said.
The government made a 20% ethanol blend in petrol, known as E20, the nationwide mandatory standard earlier this year. However, concerns have emerged among some motorists over the compatibility of the blend with older vehicles.
The latest tender has also revised the procurement economics for corn-based ethanol.
According to the document, oil marketing companies have reduced the incentive for corn-based ethanol to Rs 2.79 per litre from Rs 5.79 per litre, bringing the procurement price down to Rs 68.86 per litre from Rs 71.86 per litre, the report said.
The revised procurement framework highlights the government's effort to secure alternative feedstocks for ethanol production while preserving sugar supplies at a time of elevated domestic prices.
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