Industry bodies representing as many as 350 ethanol distilleries in the country have flagged the latest ethanol order, claiming it’s “economically inefficient” and “environmentally counterintuitive”, and called for urgent policy intervention to ensure that existing operational capacity is utilised optimally before encouraging new investments in deficit zones.
The Ethanol Supply Year (ESY) 2025-26 tender, issued by Oil Marketing Companies (OMCs), has come under fire from stakeholders who allege that the allocation criteria have been creating “artificial imbalances”, while sidelining distilleries set up under prior government commitments.
According to the tender document (#1000442332), zones where offers from local distilleries fall short of requirements are classified as ‘deficit zones’, with all local offers considered full for allocation.
Industry insiders claim that many of the affected distilleries had invested heavily based on government commitments under the Ethanol Blended Petrol (EBP) programme, which aims to reduce fossil fuel imports and support farmers through sugarcane and grain procurement.
The government’s allocation approach via its latest tender ignores surplus capacity in neighbouring states, they allege, much of which was established under Long-Term Offtake Agreements (LTOA) and Expression of Interest initiatives promoted by OMCs themselves.
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“A more holistic procurement model is needed – one that considers surplus availability across states, pre-existing capacities and investments, prior understandings and commitments made with distilleries,” said C K Jain, President, Grain Ethanol Manufacturers Association (GEMA).
The current allocation mechanism is not only economically inefficient but also environmentally counterintuitive as it promotes the creation of redundant capacity while neglecting existing infrastructure, he added.
The ethanol-blending programme is a key initiative undertaken by the Centre to push for energy security, having already made significant progress in recent years as it marches towards its target of 20 per cent ethanol-blending in petrol.
Meanwhile, the published allocations indicate that at least 350 distilleries have been deprived of adequate orders, raising questions about the fairness of the procurement process.
The original goals of the ethanol programme included addressing regional deficits through localised production, reducing transport costs, and supporting farmers, but the current implementation appears to be creating market distortions, stakeholders said.
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