The Indian Sugar and BioEnergy Manufacturing Association (ISMA) said that upward revision of ethanol procurement prices and allowing higher ethanol supply allocation will benefit the industry.
The Association said that despite a 16.5% increase in Fair and Remunerative Price (FRP) of sugarcane from ₹305 per quintal (2022–23 SS) to ₹355 per quintal (2025–26 SS), ethanol procurement prices from sugarcane-based feedstocks such as Sugarcane Juice and B-Heavy Molasses (BHM) have remained unchanged since 2022–23.
Ethanol cost-price disparity
This has led to cost-price disparity, which is financially distressing for the industry. The Association stated that the current cost of production of B-Heavy Molasses is approximately Rs. 66.09 per litre, whereas the current procurement price is Rs. 60.73 per litre; this results in a gap of Rs. 5 per litre between the cost of production and revenue generation for the same.
The same is with ethanol produced from Sugarcane Juice. The cost-price disparity is Rs. 5 per litre, as seen in the table below.
Also, in both cases of BHM and SCJ, the gap is Rs. 10 per litre and Rs. 11 per litre, respectively, when the government-determined formula is taken into consideration.
| Feedstock | Cost of Production (₹/litre) | Formula Price*
(₹/litre) |
Current OMC Price (₹/litre) | Price Gap with CoP (₹/litre) | Price Gap with Formula Price
(₹/litre) |
| B-Heavy Molasses | 66.09 | 70.65 | 60.73 | ~5 | ~10 |
| Sugarcane Juice | 70.70 | 76.33 | 65.61 | ~5 | ~11 |
*Using government determined formula, the Procurement Price of Ethanol should be:
from B-heavy molasses: ₹70.65/Litre
from sugarcane Juice: ₹76.33/Litre
Deepak Ballani, DG, ISMA said that the widening cost–price gap of about ₹5 per litre makes ethanol production from these feedstocks financially unviable, impacting mill liquidity and farmer payment timelines.
He said, “Non-revision of the ethanol procurement price will make ethanol production from sugarcane-based feedstocks uneconomical, and sugar mills will not divert excess sugar towards ethanol production. This will worsen the domestic sugar surplus, and sugar mills will face increased inventory and cash flow pressure”.
ISMA stressed that revising ethanol procurement prices is critical to maintaining a balanced sugar–ethanol equation, ensuring stable domestic sugar prices, and sustaining the Ethanol Blended Petrol (EBP) programme.
Ethanol allocation- Need for feedstock balance
Another pressing issue that the sugar mills face today is lower ethanol supply allocation.
Niti Aayog, in its 2021 Biofuel Roadmap, projected that the sugar sector would contribute about 55% (550 crore litres) of the total 1,016 crore litre ethanol requirement for achieving 20% blending (E20) by 2025–26.
The Association said that, encouraged by this vision and government interest subvention schemes, the sugar industry has invested over ₹40,000 crore, building an installed ethanol production capacity of over 900 crore litres.
At 90% capacity utilisation, and after supplying around 160 crore litres for industrial use, the sugar sector is capable of producing around 650 crore litres for fuel blending, in full alignment with national targets, which is equivalent to 60 LMT of sugar diversion.
However, under the Ethanol Supply Year (ESY) 2025–26, the sugar sector’s allocation has been drastically cut to 289 crore litres, representing only a 28% share, with only ~34 LMT sugar diversion, while grain-based ethanol has been allocated 72%.
Allocation Disparity (ESY 2025–26)
| Source | Offers (Cr L) | Allocation (Cr L) | % Share |
| Molasses-based | 472 | 289 | 28% |
| Grain-based | 1305 | 760 | 72% |
| Total | 1776 | 1048 | 100% |
ISMA said that if this feedstock imbalance is not corrected, it would lead to reduced distillery utilisation to below 50%, leaving assets idle and threatening economic viability, loan repayment, and operational stability.
“With lower ethanol offtake, only ~34 LMT of sugar is expected to be diverted, which will lead to surplus stocks, price pressure, and financial strain on mills. Declining ethanol revenues will cause liquidity crunches. This will adversely impact the industry’s ability to repay loans and pay farmers on time, resulting in farmer distress. Also, this would result in overdependence on food grains (especially maize), which will affect feed availability, cropping patterns, and carbon intensity, while sugarcane-based ethanol offers better emission reduction and rural sustainability,” Ballani summed up.
ISMA has recommended to the Government to rebalance ethanol allocations by reserving at least 50% share for sugar-based feedstocks in line with NITI Aayog’s EBP roadmap and ensuring Fair Allocation in Cycle 2 Tender by allocating 150 crore litres of ethanol from sugarcane juice and B-heavy molasses (BHM) to maintain supply balance and sectoral stability.
