With the oil marketing companies (OMCs) allocating only a “smaller” portion of total requirement for ethanol from sugar-based feedstock for the supply year 2025-26, the sugar industry on Wednesday expressed concern that it would lead to surplus stocks of the sweetener, underused distilleries and delayed payments to the farmers in the current season (October-September).
“The government must rebalance ethanol procurement allocation to sugar industry to at least 50% of the total requirement of OMCs while allowing exports of at least two million tonne (MT) of raw sugar in the 2025-26 season while revised upward minimum selling price (MSP) of sweetener so that surplus stocks could be liquidated,” Niraj Shirgaokar, vice president, Indian Sugar and Bio-Energy Manufacturers Association (ISMA) told FE.
According to an ISMA statement, only 2890 million litres of ethanol, just 28% of the total requirement, have been allocated from sugar-based feedstocks for the 2025–26 ESY, compared to 72% or 7610 million litres from grain-based sources – 4780 million litres from maize (45%), and 2830 million litres from rice (22%).
“This imbalance, it warned, could curb sugar diversion to ethanol and strain mill liquidity,” Shirgaokar stated.
ISMA has projected sugar production is expected to rise 18% to 34.9 MT in the 2025-26 season compared to previou season. With current ethanol allocation only 3.4 MT sweetener could be diverted, which may cause glut this season. The consumption os pegged at 28 MT while opening stock of sweetener on October 1 was around 5 MT.
In the second round of tendering by OMCs, later part of ESY, the sugar industry has urged that atelast 1500 million litres should be allocated to it.
According to ISMA, the sugar industry having invested over Rs 40,000 crore to create more than 9000 million litre ethanol capacity, as per the NITI Aayog’s 2021 biofuel roadmap of 2020-25, which projected that the sugar sector would contribute about 55% or 5500 million litre out of the total 1,0160 million litre ethanol requirement for achieving 20% blending with petrol (E20) by 2025–26.
According to sources, ethanol manufacturers have submitted bids to supply over 17,760 million litres of the biofuel to the OMCs for the 2025-26 (ESY) against the tender of 10,500 million litres.
Out of total offers, over 4710 million litres is offered from sugarcane based feedstock units and more than 13,040 million litres is offered by the grain-based ethanol makers.
According Deepak Ballani, DG, ISMA, while the sugarcane fair and remunerative price (FRP) of sugarcane has risen 16.5% since 2022–23 to Rs 355/quintal currently, ethanol prices from juice and B-heavy molasses remain unchanged, creating a Rs 5/litre gap. He said this mismatch would makes sugarcane-based ethanol unviable and delays cane payments to farmers
“The cost of production of ethanol stands at Rs 66.09/litre from B-heavy molasses and Rs 70.70/litrefrom sugarcane juice. However, the current procurement prices of OMCs are Rs 60.73 and Rs 65.61/litre respectively,
The sugar industry also demanded revision of MSP of sugar which has remained unchanged at Rs 31/kg since February, 2019, while FRP has increased by 29% to Rs 355/quintal, which had boosted cost of production to Rs 40.24/kg at present.
Govt considering allowing sugar exports
The food ministry has indicated that it is considering allowing sugar exports in the 2025-26 marketing year, as surplus stocks accumulate due to lower-than-expected diversion of the sweetener.
