State-run petroleum companies have not included ethanol made from sugarcane juice, sugar syrup and ‘B-heavy molasses’ in the latest purchase tender for the supply year 2026-27 for blending ethanol in petrol. The government has taken this step to maintain the availability of sugar at the local level and to continue the nationwide program of ethanol blending in petrol. Bharat Petroleum Corporation Limited (BPCL) has invited bids for the purchase of around 1,100 crore liters of ethanol for the supply year beginning November in a tender issued by petroleum marketing companies on October 16. Its aim is to meet the requirement of blending 20 percent ethanol in petrol. In the tender, the incentive amount on corn-based ethanol was also reduced to Rs. 68.86 per litre, which was earlier Rs. 71.86 per litre.

What will change?

The tender stated that the Government of India has directed that the use of sugar in ethanol production should be reduced to zero for the ethanol supply year 2026-27. It said bids were not sought for sugarcane juice, sugar or sugar syrup and ethanol produced from B-heavy molasses in this quantity-based procurement tender. The ban will lead to a change in the raw material procurement strategy for the ethanol blending program. The program uses ethanol made from both grain and sugarcane to reduce crude oil imports and vehicle emissions. According to the tender documents, bids can be invited for supply of ethanol made from maize, broken rice, surplus rice procured by Food Corporation of India (FCI) and C-heavy molasses.

Plan to reduce sugar prices

The reduction in the incentive amount on corn-based ethanol from Rs 5.79 to Rs 2.79 per liter is likely to reduce the profits of companies making ethanol from this grain. At the same time, by excluding sugar-based raw materials from the tender, the importance of alternative raw materials will increase. The move comes amid growing concern over availability of sugar at the local level. In major sugar producing states including Maharashtra and Karnataka, there is a risk of reduced production and higher prices due to low rainfall. India, the world’s largest consumer of sugar, has rapidly increased its use of ethanol blended in petrol to reduce dependence on imported crude oil. However, the use of sugarcane and sugar for fuel production may affect their availability for food consumption, especially when production is expected to decrease.