Since the Ethanol Supply Year (ESY) runs from November to October, the government has permitted sugar mills and distilleries to produce ethanol in the 2025-26 marketing year without any ‘quantitative restrictions’.
In a notification by the food ministry, it stated: “Sugar mills and distilleries are allowed to produce ethanol from sugarcane juice/sugar syrup, B-heavy molasses as well as C-heavy molasses during ESY 2025-26 without any restrictions”.
The ministry also said there would be periodic reviews of the diversion of sugar to ethanol production in consultation with the petroleum ministry so as to ensure a smooth supply of the sweetener in the domestic market.
Also Read: Sugar trade body seeks revision of Centre’s export quota rules
During the current ESY 2024-25, the government permitted the diversion of 40 lakh tonnes of sugar for ethanol production under its ambitious Ethanol Blended Petrol (EBP) programme.
Public Sector Oil Marketing Companies (OMCs) sell ethanol blended with petrol, and achieved an average ethanol blending of 19.05 per cent as on July 31, 2025.
The National Policy on Biofuels 2018, as amended in 2022, inter alia advanced the target of 20 per cent blending of ethanol in petrol from 2030 to ESY 2025-26.
Sugar industry hails govt's move as 'jackpot for farmers'
The sugar industry on Tuesday welcomed the Centre's decision to remove quantitative restrictions on ethanol production from sugar for 2025-26, terming it a "jackpot for farmers" that will ensure timely cane payments and help keep sweetener prices under control.
"It is a positive development considering higher sugar production next year. About 5 million tonne of sugar can be diverted for ethanol in 2025-26," said Deepak Balani, Director General, Indian Sugar and Bio-Energy Manufacturers Association (ISMA).
The move will help mills keep sugar stocks in balance as well as check prices and ensure timely cane payment to farmers, he added.
"We can say it is a jackpot for farmers as they will get cane payment much sooner," All India Sugar Trade Association (AISTA) Chairman, Praful Vithalani, said.
He explained that mills can now produce ethanol and receive quick payments from PSU refineries instead of selling sugar above monthly quotas for working capital during the season.
The Managing Director of National Federation of Cooperative Sugar Factories Ltd (NFCSF), Prakash P Naiknavare, said this is in line with the Sugar Control Order 2025. "This gives flexibility to sugar mills to decide the product profile."
Initially, the government had restricted diversion of sugar at 4 million tonne for ethanol in the ongoing ESY 2024-25, but later restricted it to 3.3 million tonne, from which 340 crore litres of ethanol have been produced.
ISMA expects 450-500 crore litre ethanol production from the diversion of 5 million tonne of sugar during ESY 2025-26.
According to Vithalani, the industry was concerned about the likely availability of excess sugar at a time when there was no export parity during the 2025-26 season.
Global analysts have estimated initial sucrose availability at 35-36.5 million tonnes for the 2025-26 season, while the country needs a maximum of 31 million tonnes of sugar.
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