India stopped state-run oil companies from buying ethanol made from sugarcane for the next supply year starting November 1. This move aims to protect domestic sugar supplies after poor monsoon rains hurt production. Companies can still use other materials like corn and damaged grains to meet their blending targets instead.
India has stopped state-run oil companies from buying ethanol made from sugar and key sugarcane-based materials for the next supply year, a move that could help preserve sugar supplies as poor rainfall threatens domestic production.
The restriction will take effect from November 1, when the new ethanol supply year begins.
The decision comes after a weak monsoon and El Nino-related dry weather hurt sugarcane output, tightening supplies and pushing up global sugar prices.
India is the world's second-largest sugar producer, and a smaller crop has raised concerns about the availability of the sweetener.
According to a report by Bloomberg, five state-owned fuel companies have issued a joint tender for nearly 11 billion litres of ethanol for the coming supply year, following the government's directions.
The tender excludes ethanol made from sugarcane juice, sugar, sugar syrup and B-heavy molasses.
Sugar supplies take priority amid weaker harvest
The move could help keep more sugarcane-derived material available for sugar production at a time when supplies are under pressure.
However, the restrictions do not amount to a complete halt to ethanol procurement, as oil companies can still source the fuel from other permitted raw materials.
The tender was issued by Indian Oil Corporation, Bharat Petroleum Corporation, Hindustan Petroleum Corporation, Numaligarh Refinery and Mangalore Refinery and Petrochemicals, the report said.
It allows suppliers to offer ethanol made from C-heavy molasses, damaged food grains, surplus rice held by the Food Corporation of India, corn and other feedstocks permitted under the National Policy on Biofuels.
India balances ethanol goals with sugar availability
India has expanded ethanol production over the past few years to reduce its dependence on imported crude oil and provide sugarcane farmers with an additional source of income.
Sugar mills have also benefited from selling ethanol to oil companies instead of relying entirely on sugar sales.
The government had advanced its target of blending 20 per cent ethanol into petrol by five years, and India achieved the goal in 2025.
The latest restrictions could limit the use of sugarcane-based feedstocks for ethanol during the next supply year.
At the same time, allowing procurement from corn, damaged grains and other approved sources gives oil companies alternative ways to meet their blending requirements.