Grain-based distilleries are unhappy with a Rs 3/litre reduction in the purchase price of maize-based ethanol. Meanwhile, the sugar industry has welcomed the government’s decision, though it cautioned against giving preferential treatment to dedicated ethanol plants.

For the first time since the rollout of the ethanol blending programme, oil marketing companies (OMCs) have lowered the purchase price for biofuel made from maize feedstock. While the initial procurement price for maize-based ethanol was low during the 2022–23 Ethanol Supply Year (ESY), it was subsequently increased before this latest reduction.

While the purchase rates of ethanol made from C-Heavy Molasses (CHM) and damaged foodgrains (broken rice) during the 2026-27 ethanol supply year (ESY) have been kept at the same levels of Rs 57.97/litre and Rs 64/litre, respectively, as were in 2025-26, the government has hiked the rate of rice sold by the Food Corporation of India (FCI) by Rs 1.82/litre.

Taking cue from the 2023-24 ESY, when due to a ban on ethanol from sugarcane juice and B-Heavy Molasses (BHM) the government did not hike prices, this time it has not announced their prices for 2026-27 ESY after announcing that OMCs will not buy ethanol if made from cane juice/syrup and BHM.

The OMCs have floated the first (cycle 1) tender to buy 1100 crore litres of ethanol, made from different feedstock during ESY 2026-27 (November-October) – 300 crore litre each in Q1 and Q2, 250 crore litre each in Q3 and Q4.

Sources said that grain-based distilleries never supported the government’s assured MSP for maize programme launched through Nafed as they were not ready to pay MSP when market rates were lower than the government-set rate.

Since the ethanol rate was set on the basis of prevailing rate of maize after factoring the average recovery, it was natural to expect downward revision too, the sources said adding the sugar industry does not enjoy such a privilege as sugar mills have to pay sugarcane farmers at least the fair and remunerative price (FRP), which is raised every year.

The government was forced by grain-based distilleries to hike ethanol purchase rates mid of the season twice during 2022-23 after plants stopped operation citing losses due to increase in market rates of maize.

“A balanced ethanol policy must support viable production from both maize and rice, with procurement prices reflecting their different cost structures and allocations providing reasonable visibility to producers. Cutting the maize incentive while lower-priced rice-based supplies remain available risks weakening the economics of maize-based production and the market it creates for farmers,” CK Jain, President, Grain Ethanol Manufacturers Association (GEMA), said in a statement.

“The government and OMCs need to review pricing and allocation together, because the industry’s ability to service its investments and sustain grain purchases depends on both. Using surplus rice can support the blending programme, but it should complement the push towards maize rather than undermine it,” Jain said.

On the other hand, seeking ethanol from CHM procurement price be raised to ₹62.23/litre, Deepak Ballani, Director-General of Indian Sugar & Bio-Energy Manufacturers Association (ISMA), said: “While the preferential allocation provided to Dedicated Ethanol Plants (DEPs) holding Long-Term Offtake Agreements (LTOAs) under the current tender for ESY 2026–27 is already in place, its continuation in subsequent years could seriously prejudice the interests of the sugar industry.

If preferential allocation to DEPs continues to restrict the access of sugar mills to ethanol procurement in surplus seasons, it would deprive them of an important revenue stream, aggravate their financial stress and impair their ability to make timely FRP payments to sugarcane farmers.”

The continued preference for DEPs would defeat the very objective of introducing the ethanol blending programme as a means of improving the sugar industry’s financial liquidity and facilitating timely payment of cane dues, Ballani said.

Supporting the restriction on use of sugarcane juice and BHM for ethanol production, ISMA said that domestic sugar consumption must remain the foremost priority, particularly this season when emerging El Niño conditions and weather variability in key sugarcane-growing regions could affect crop yields and sugar production.

Published on October 20, 2026