Govt halts sugar-based ethanol procurement as weak monsoon hurts output

New Delhi: The Centre has directed state-owned fuel retailers to stop procuring ethanol made from sugar and key sugarcane-based feedstocks in a move aimed at keeping a lid on sugar prices.

The direction will take effect from the new supply year starting November 1 after dry weather hits sugarcane production, according to the tender document.

PSU refiners -- Indian Oil Corp Ltd (IOCL), Bharat Petroleum Corp Ltd (BPCL), Hindustan Petroleum Corp Ltd (HPCL), Numaligarh Refinery Ltd and Mangalore Refinery and Petrochemicals Ltd -- have issued a joint tender seeking nearly 11 billion litres of ethanol for the new supply year, citing the new government directions.

"No offers have been sought for ethanol produced from sugarcane juice, sugar, sugar syrup and B-Heavy molasses in this quantity bid tender," according to the document.

India -- the world's second-biggest sugar producer -- faces a smaller crop than a year earlier after El Nino contributed to the weakest monsoon in more than a decade.

The nation has increasingly used sugarcane and grains to produce ethanol as part of efforts to curb dependence on imported oil.

Moreover, the government had brought forward its target of blending 20 per cent ethanol into gasoline by five years and achieved the goal in 2025.

Suppliers participating in the latest tender can offer ethanol produced from C-heavy molasses, damaged food grains, surplus rice procured from Food Corp of India, corn and other feedstocks permitted under the National Policy on Biofuels.

Apart from that, the government has permitted sugar mills to sell sugar produced in October 2026 during October and November 2026 over and above the regular monthly release quotas.

As per the government order, if a sugar mill produces 1,000 MT of sugar during October, it may sell the quantity during October and November, in addition to quantities allocated under regular monthly release quotas.

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