Govt mulls curbing use of cane for ethanol to tame record-high sugar market
The government is considering restricting the use of sugarcane for ethanol production in the season beginning October, to boost sugar availability and ease record-high sugar prices
Sugar mills may be directed to stop producing ethanol from sugarcane juice and B-heavy molasses, and instead draw ethanol mainly from C-heavy molasses (the residual, lower-sugar-content stream)
The move follows concerns over reduced rainfall in Maharashtra and Karnataka, India's leading sugarcane-producing states, which has raised doubts about next season's cane output
Mills diverted roughly 3 million tonnes of sugar equivalent (about 10% of total production) toward ethanol in the season ending September; restricting this diversion could free up a similar volume for sugar production
A final decision is expected by the end of the following month
Ethanol Blended Petrol (EBP) Programme and the National Policy on Biofuels, 2018
The EBP Programme mandates blending ethanol with petrol and is the vehicle through which India pursues energy security and reduced crude oil imports. The National Policy on Biofuels, 2018 set an original target of 20% ethanol blending by 2030; a 2022 amendment advanced this deadline to Ethanol Supply Year (ESY) 2025-26 and widened eligible feedstocks to include damaged foodgrains, broken rice, and grains unfit for human consumption, alongside sugarcane-derived sources. India reached the 20% blending milestone within ESY 2025-26 (November 2025-October 2026).
Key Details
- Original target: 20% blending by 2030 (National Policy on Biofuels, 2018)
- Advanced via 2022 amendment to ESY 2025-26
- Nodal ministry: Ministry of Petroleum and Natural Gas, with agriculture inputs from the Ministry of Consumer Affairs, Food and Public Distribution
- Eligible feedstocks: sugarcane juice, B-heavy and C-heavy molasses, damaged foodgrains, surplus rice and maize
The proposed curb on cane-juice and B-heavy molasses ethanol shows the tension inherent in the EBP Programme itself — meeting blending targets can compete directly with sugar (and food) supply, forcing the government to reprioritise feedstocks when one commodity's price spikes.
Fair and Remunerative Price (FRP) and the Sugarcane (Control) Order, 1966
The FRP is the minimum price that sugar mills are legally bound to pay farmers for cane, fixed under the Sugarcane (Control) Order, 1966 issued under the Essential Commodities Act, 1955. The FRP is recommended by the Commission for Agricultural Costs and Prices (CACP) and approved by the Cabinet Committee on Economic Affairs (CCEA). It replaced the earlier Statutory Minimum Price (SMP) mechanism following a 2009 amendment to the Control Order.
Key Details
- Legal basis: Sugarcane (Control) Order, 1966 under the Essential Commodities Act, 1955
- Recommending body: CACP; approving body: CCEA (chaired by the Prime Minister)
- FRP replaced SMP via the October 2009 amendment
- Mills must pay FRP within 14 days of cane delivery
- FRP for the 2026-27 sugar season: ₹365 per quintal at a base recovery rate of 10.25%
Any output shortfall from reduced Maharashtra-Karnataka rainfall directly affects cane availability against which mills must honour FRP obligations, adding pressure on the government to protect sugar supply over ethanol diversion.
Ethanol Feedstock Streams — Cane Juice, B-Heavy and C-Heavy Molasses
Ethanol from sugarcane can be produced from three streams with different sugar-diversion implications: direct cane juice or syrup (highest sugar diversion, no sugar produced), B-heavy molasses (an intermediate byproduct after partial sugar extraction, yielding around 280 litres of ethanol per tonne), and C-heavy molasses (the final, most sugar-depleted byproduct, yielding around 220-225 litres per tonne but leaving maximum sugar available for the market).
Key Details
- C-heavy molasses: lowest sugar diversion, lowest ethanol yield per tonne (~220-225 litres)
- B-heavy molasses: higher ethanol yield (~280 litres per tonne) but diverts more sugar
- Direct cane juice/syrup route: maximises ethanol output but forgoes sugar production entirely
- Grain-based feedstocks (maize, surplus rice) now account for roughly two-thirds of national ethanol production, reducing dependence on cane-based routes
Restricting mills to the C-heavy molasses route — as reportedly being considered — is the most direct lever available to the government to preserve sugar output while keeping some ethanol supply flowing, without abandoning the EBP Programme's blending targets.
- Sugar mills diverted an estimated 3 million tonnes of sugar equivalent (~10% of total production) to ethanol in the season ending September
- Maharashtra and Karnataka are India's largest sugarcane-producing states
- FRP for sugarcane, 2026-27 season: ₹365/quintal at 10.25% recovery rate (CCEA-approved, CACP-recommended)
- National Policy on Biofuels, 2018 (as amended 2022): 20% ethanol blending target advanced from 2030 to ESY 2025-26
- India achieved the 20% ethanol blending milestone within ESY 2025-26 (November 2025-October 2026)
- Ethanol yield: ~220-225 litres/tonne from C-heavy molasses vs ~280 litres/tonne from B-heavy molasses