India Bars Sugar-Based Ethanol for 2026-27 and Cuts the Maize Incentive: Balancing Fuel Goals and Food Supply
For the 2026-27 ethanol supply year (starting in November 2026), the ethanol purchase tender of the oil marketing companies (OMCs) does not allow ethanol made from sugar-based feedstocks: sugarcane juice, sugar syrup and B-heavy molasses.
The tender also reduces the extra incentive that was being paid for ethanol made from maize.
The reason is concern about domestic sugar supply. Poor rainfall in key sugar-producing States, especially Maharashtra and Karnataka, has raised the risk of lower sugar output and higher sugar prices.
India's sugar production in 2025-26 was about 30.6 million tonnes, about 11% below early estimates. Carryover sugar stocks on 1 October 2026 were about 3.75 million tonnes, down from 5 million tonnes a year earlier.
In 2025-26, mills diverted about 3 million tonnes of sugar (nearly 10% of output) into ethanol. Stopping this diversion lets mills use all their cane to make sugar for the domestic market.
The 20% blending target (E20) is not changed. About three-fourths of India's ethanol already comes from grains such as maize and rice.
Ethanol Blended Petrol (EBP) Programme
The Ethanol Blended Petrol (EBP) Programme is the Government of India's plan to mix ethanol, a fuel made from plants, into the petrol sold at pumps. "E20" means petrol with 20% ethanol. Blending cuts crude oil imports, reduces some pollution and gives farmers and mills another source of income. Oil marketing companies (OMCs) buy ethanol from distilleries through yearly tenders at prices fixed for each feedstock.
The 2026-27 tender keeps E20 going but closes the sugar-based routes for one year, so almost all ethanol will come from grains and C-heavy molasses. Cutting the maize incentive shows the government also wants to keep a check on how much maize is pulled away from food and feed.
Sugar Sector Regulation in India: Sugarcane (Control) Order, FRP and Minimum Selling Price
India's sugar sector is one of the most tightly controlled parts of the economy. The government fixes the minimum price mills must pay farmers for cane, a floor price at which mills can sell sugar, export limits, and how much cane or sugar can be turned into ethanol. These controls exist because about 5 crore farmers depend on sugarcane, and sugar is an essential item for every household.
The bar on sugar-based ethanol is a supply-management tool. By stopping diversion, the government wants more sugar in the market and steadier retail prices after a weak monsoon in Maharashtra and Karnataka. But mills lose a profitable income source, which can make it harder for them to pay farmers the FRP on time.
Food vs Fuel Debate: Biofuels and Food Security
The food vs fuel debate is about one simple question: should crops and land be used to feed people and animals, or to make fuel for vehicles? When crops like sugarcane, maize or rice are turned into ethanol, less of them is left for food, and their prices can rise. Supporters of biofuels say they cut oil imports and help farmers. Critics say they can make food costlier, use scarce water and push up prices for the poor.
Barring sugar-based ethanol for 2026-27 is a clear example of the government choosing food over fuel when supplies are tight. Cutting the maize incentive applies the same caution to grain, so that ethanol demand does not keep pulling maize away from feed and food.
- Applies to ethanol supply year 2026-27, starting November 2026
- Barred feedstocks: sugarcane juice, sugar syrup and B-heavy molasses
- Incentive for maize-based ethanol reduced
- 2025-26 sugar output: about 30.6 million tonnes, about 11% below early estimates
- Carryover sugar stock on 1 October 2026: about 3.75 million tonnes (5 million tonnes a year earlier)
- Sugar diverted to ethanol in 2025-26: about 3 million tonnes (nearly 10% of output); share of diversion fell from 12% in 2022-23 to 9% in 2025-26
- About three-fourths of India's ethanol now comes from grains
- E20 (20% ethanol in petrol) target unchanged