India bars sugar-based ethanol in 2026-27 tender to secure domestic food supplies

What changed in the 2026-27 ethanol tender

India's state-run oil marketing companies have excluded sugarcane juice, sugar syrup, and B-heavy molasses from their latest ethanol procurement tender for the 2026-27 supply year. The strategic move aims to safeguard domestic sugar availability and keep retail prices stable across the country following uneven rainfall in major producing states like Maharashtra and Karnataka.

The government issued directions specifying that sugar diversion for fuel blending be brought down to zero for the upcoming cycle, which runs from 1 November 2026 to 31 October 2027. The combined quantity bid tender, issued on 16 October by Bharat Petroleum Corporation Limited on behalf of Indian Oil Corporation, Hindustan Petroleum Corporation, Mangalore Refinery and Petrochemicals, and Numaligarh Refinery, invites bids for 1,100 crore litres (11 billion litres) of denatured anhydrous ethanol.

To sustain the nation's 20% petrol blending standard (E20) without impinging on food security, procurement will rely on grain-based sources and C-heavy molasses.

Feedstocks and procurement rates

The tender sets out clear pricing structures across eligible feedstocks, encouraging grain suppliers while calibrating market incentives:

The incentive on maize-based ethanol was revised to ₹2.79 per litre from ₹5.79 per litre, adjusting the total basic price to ₹68.86 per litre. Surplus rice sourced from the Food Corporation of India will be accepted during the first three quarters of the supply year, but not in the fourth.

Balancing energy security and domestic needs

India successfully achieved its target of 20% ethanol blending in petrol, significantly reducing crude oil import dependency and cutting vehicle emissions. By pivoting the feedstock mix toward grains and C-heavy molasses, the government has shown flexibility in protecting household consumers from sugar price volatility while maintaining national energy objectives.

Net domestic sugar consumption stands between 280 lakh and 285 lakh tonnes annually. Prioritising sugar stocks for direct consumption during periods of constrained agricultural yield ensures both price stability and national supply resilience. Distillers supplying under the tender must process indigenous feedstocks at their own approved facilities, with third-party trading strictly prohibited.