Ethanol tender for 2026-27 excludes sugar-based feedstocks and cuts maize price

State-run oil marketing companies have left ethanol made from sugarcane juice, sugar syrup and B-heavy molasses out of their ethanol procurement tender for the 2026-27 supply year, and have cut the price paid for maize-based ethanol, according to reports by The Hindu and Reuters.

What the tender says

The Hindu reports that Bharat Petroleum Corporation Limited issued the tender on October 16 on behalf of the oil marketing companies. It seeks bids for around 11 billion litres of ethanol for the supply year beginning in November, to meet the requirement of blending 20% ethanol in petrol. The supply year runs from November 2026 to October 2027.

According to the tender document as quoted by The Hindu, the Government of India has directed that sugar diversion for ethanol be reduced to zero for the 2026-27 supply year, and no offers have been sought for ethanol from sugarcane juice, sugar, sugar syrup or B-heavy molasses. The tender allows bids for ethanol made from maize, broken rice, surplus rice procured by the Food Corporation of India, and C-heavy molasses.

The procurement price for maize-based ethanol falls to ₹68.86 per litre from ₹71.86. The Hindu describes this as a reduction in the maize incentive to ₹2.79 per litre from ₹5.79, and says it is expected to lower returns for producers supplying ethanol from the grain.

Reasons reported

The Hindu links the move to concerns over domestic sugar availability and rising prices after poor rainfall in key sugar-producing states, including Maharashtra and Karnataka, which raised the risk of lower output. It says the tender is an attempt to protect sugar supplies while continuing the nationwide blending program, under which petrol containing up to 20% ethanol (E20) is the standard.

The Economic Times reports the same decision and also links it to rising sugar prices and poor rainfall. Reuters, as carried by The Hindu BusinessLine, says the aim is to raise domestic sugar availability and ease record-high prices in India, the world's biggest sugar consumer. It quotes Siddhartha Khemka of Motilal Oswal Financial Services as saying sugar prices have risen more than 10% during the festive season, before the main crushing season begins. Analysts from Motilal Oswal and Choice Broking told Reuters the decision reflects the government's priority of protecting food supplies after concerns that weak rainfall could cut output.

Market reaction

Reuters reports that sugar company shares fell in early trade on October 19 after the direction. It lists Balrampur Chini Mills, EID Parry, Triveni Industries, Bajaj Hindusthan Sugar, Shree Renuka and Dhampur Sugar as falling between 2% and 6% in morning trade. Reuters says the decision removes a higher-margin outlet for sugar mills, limits their ability to shift cane and molasses between sugar and ethanol depending on market conditions, and could weaken margins and reduce returns on ethanol-capacity investments.

What the reports do not say

The reports read do not say how the 11 billion litres will be divided among the permitted feedstocks, or whether the government plans a different treatment of sugar-based ethanol in later supply years. The Hindu notes that the shift makes feedstock availability, procurement prices and distillery capacity more important for meeting blending targets.