Informist, Wednesday, Aug. 13, 2025

By Afra Abubacker

MUMBAI – The government is aiming for higher ethanol production from sugar-based feedstocks in the coming year. But industry experts say that the extent of sugar diversion for ethanol will ultimately hinge on sugar availability and ethanol price revisions.

On Monday, Ashwini Srivastava, joint secretary (sugar), said that sugar diversion is likely to be 4.0-5.0 million tonnes in 2025-26 (Oct-Sept), in line with the industry estimates of 5 million tonnes. He noted that his projections were based on expectation of a good sugar output next season.

According to preliminary estimates by the Indian Sugar Mills & Bio-Energy Manufacturers Association, India's gross sugar production in 2025-26 is expected to rise 18.3% on year to 34.9 million tonnes, aided by good rains and better crop quality. These figures also include sugar that will be used for ethanol manufacturing.

But there is a note of caution. "The government has no hard data on sugar production, they only have cane area data," said G.K Sood, the chairman of MEIR Commodities. Sood said the government will have data only by September end, when they collate it from state cane commissioners.

Industry experts also caution that early sugar output estimates often carry a high margin of error. Over the past two years, initial estimates have deviated sharply from actual production. In 2024-25, forecasts of a bumper production were later cut drastically as the crushing season progressed. In 2023-24, lower projections prompted the government to restrict sugar-based ethanol production at 2.5 mln tn, but actual output later exceeded expectation and created surplus stocks.

"We made two big mistakes in the last two years. One year, we assumed a bad crop and ethanol suffered when the crop turned out good. Last year, the opposite happened," Shree Renuka Sugars Executive Chairman Atul Chaturvedi had told Informist earlier.

SUGAR OR ETHANOL

ISMA hopes for 5 million tonnes of sugar diversion for ethanol in the upcoming 2025-26 season. But the association emphasises that mills will weigh sugar versus ethanol output based on the purchase prices offered by oil marketing companies. Ethanol rates have largely remained unchanged for most sugar-based feedstocks.

Unlike last sugar season, the government did not impose any restriction on sugar diversion in 2024-25. Despite an 18% downfall in sugar production, mills and distillers were free to divert as well as export sugar, as the country entered the season with ample carryover stocks.

Yet, sugar diversion for 2024-25 was not as strong as expected. Mills have so far diverted around 3.0 million tonnes of sugar for ethanol, lower than the earlier estimate of 4.0 million tonnes. The official expects diversion to total 3.4 million tonnes by October, broadly in line with industry estimates of 3.2 million tonnes.

Industry players say the drop in diversion this year was largely a business decision by mills to prioritise sugar production over ethanol. Others attribute it to lower sucrose availability, while some point to smaller ethanol procurement allocations from oil companies.

Citing rising production costs, ISMA has repeatedly called for higher ethanol prices. For 2024-25 (Nov–Oct), the government raised the rate for ethanol made from C-heavy molasses to INR 57.97 per litre from INR 56.28, but left prices for ethanol from sugarcane juice INR 65.61 per litre and from B-heavy molasses INR 60.73 per litre, unchanged since 2022-23.

Sood differs. According to him, sugar diversion fell on lower availability of sucrose in 2024-25 season. "If prices of (ethanol) were lower, they (distillers) would not have placed supply orders," he added. Though industry hoped for revisions in ethanol prices, they had contracted supply orders at the prevailing rates, which he said are "adequate."

Meanwhile, some say sugar sector's share in ethanol basket has receded and replaced by grains. "Sugar-based feedstocks got lower allocation from oil marketing companies," said Prakash Naiknavare, the managing director, National Federation of Cooperative Sugar Factories.

As of Jul. 20, oil companies have given orders for 11.26 billion litres ethanol in 2024-25 (Nov-Oct), of which 7.78 billion litres or 69% will come from grains. About 31% or 3.47 billion litres supply orders have been secured for sugar-based feedstocks.

E20 AND BEYOND

India has achieved 20% blending of ethanol in petrol, or E20, five years ahead of its original target of 2030. Now, the government plans to gradually scale up to E25, E27, and E30 "in a phased, calibrated manner with the support of BIS standards and fiscal incentives," Petroleum Minister Hardeep Singh Puri said at the Pioneer Biofuels 360 Summit on Friday. The government is likely to release the roadmap for higher ethanol blends by August end, media reported Transport Minister Nitin Gadkari as saying.

However, the biofuel ecosystem is facing pushbacks from all corners. There are concerns over fuel efficiency, vehicle compatibilty, and over diversion of food crops for fuel. Puri said there has not been a single reported case of engine failure or breakdown since E20 became the base fuel 10 months ago. "Some lobbies with vested interests are actively attempting to create confusion and derail India's ethanol revolution. However, such efforts will not succeed," he added.

The government says concern over performance and mileage were anticipated as early as 2020 and were examined in detail by an inter-ministerial committee of NITI Aayog, supported by research from Indian Oil Corp. Ltd., Automotive Research Association of India, and Society of Indian Automobile Manufacturers.

Meanwhile, consumer calls for E20 to be cheaper than petrol have grown. Though E20 has lower-energy content, government says the production cost of the biofuel has increased over the years due to hikes in ethanol prices. "Some concerns have been voiced that ethanol-blended petrol should be cheaper than non-blended fuel and that this cost advantage has not been passed on to the customers. They are referring to a NITI Aayog report. In 2020-21, when the report of NITI Aayog was prepared, ethanol was cheaper than petrol," government said.

"Despite the increase in price of ethanol in comparison to petrol, the oil companies have not gone back on the ethanol blending mandate because the programme delivers on energy security, boosts farmers' incomes and environmental sustainability," government said in a release.

Interestingly, India has been pushing ethanol blended fuels, despite the global trend of rising adoption of electric vehicles. "Ethanol will see a downward slide come 2030, driven by the displacement of gasoline-run vehicles by EVs (electric vehicles), particularly in regions like Europe, the US, and China," according to Daphne Tan, agriculture specialist, S&P Global.

However, in the short term, India stands out as the fastest-growing ethanol market globally, with demand projected to rise steadily till 2026, she added. End

Edited by Akul Nishant Akhoury

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