Oil companies change ethanol recipe
The government is changing the way oil companies source ethanol for blending with petrol, with sugar-based raw materials being taken out of the latest procurement tender for 2026-27. State-run oil marketing companies (OMCs) will no longer buy ethanol made from sugarcane juice, sugar syrup and B-heavy molasses under the tender. The move is aimed at keeping more sugar available for domestic consumption while ensuring that the petrol-blending programme continues. Bharat Petroleum Corporation Ltd (BPCL), on behalf of OMCs, issued the tender on October 16, inviting bids for around 11 billion litres of ethanol for the period from November 2026 to October 2027. The requirement is linked to India's programme of blending 20% ethanol with petrol. "The Government of India has issued directions that sugar diversion for ethanol be reduced to zero for ethanol supply year 2026-27," the tender document said, as cited by PTI. "No offers have been sought for ethanol produced from sugarcane juice, sugar or sugar syrup and B-heavy molasses in this quantity bid tender," it added.
What can oil companies buy instead?
With sugar-based ethanol excluded, oil companies can source ethanol made from maize, broken rice, surplus rice procured by the Food Corporation of India (FCI) and C-heavy molasses. However, maize-based ethanol producers will also receive a lower price. The procurement price has been cut from Rs 71.86 to Rs 68.86 per litre. The incentive paid for maize-based ethanol has also been reduced from Rs 5.79 to Rs 2.79 per litre. This means producers will have to work with a lower procurement price and incentive for maize-based ethanol, even as grain-based raw materials become more important for meeting the country's ethanol needs.
Why has the government taken this step?
The decision comes amid concerns over sugar supplies and rising prices. Poor rainfall in Maharashtra and Karnataka, two key sugar-producing states, has raised the risk of lower sugar output. India is the world's largest sugar consumer and has been using ethanol blending to reduce its dependence on imported crude oil. But sugarcane and sugar used to make fuel are also raw materials that can contribute to food supplies. When sugar production is under pressure, diverting them for ethanol can add to concerns over domestic availability. The government is therefore trying to balance the need for sugar at home with its efforts to reduce oil imports and emissions.
Will petrol blending be affected?
India has adopted petrol containing up to 20% ethanol, known as E20, as the nationwide standard. Ethanol is made from agricultural raw materials, including sugarcane and grains, and blended with petrol to replace part of the fossil fuel used by vehicles. The programme has also created a substantial market for domestic distilleries and given farmers an additional source of demand for their produce. The latest tender does not end ethanol blending. Instead, it changes the raw materials oil companies can buy ethanol from. With sugar-based ethanol excluded, grain-based production will become more important in meeting the requirement. The availability of raw materials, procurement prices and distillery capacity will be key to supplying enough ethanol during the 2026-27 supply year, which runs from November 2026 to October 2027.
