The Indian government announced on September 1, 2025, that sugar mills and distilleries can produce ethanol without any quantitative restrictions during the 2025-26 Ethanol Supply Year (ESY), running from November 2025 to October 2026. The decision, outlined in a food ministry notification, allows the use of sugarcane juice, sugar syrup, B-heavy molasses, and C-heavy molasses for ethanol production, marking a significant shift from the current ESY 2024-25, where a cap of 40 lakh tonnes of sugar diversion was imposed.
The policy aims to accelerate India’s Ethanol Blended Petrol (EBP) programme, which promotes blending ethanol with petrol to reduce fossil fuel dependency and curb emissions. Public Sector Oil Marketing Companies (OMCs) have already achieved an impressive 19.05% ethanol blending average as of July 31, 2025, edging closer to the ambitious 20% target set by the National Policy on Biofuels 2018, amended in 2022 to advance the deadline from 2030 to ESY 2025-26.
To balance ethanol production with domestic sugar supply, the food ministry, in consultation with the petroleum ministry, will periodically review sugar diversion levels. This oversight ensures that the sweetener market remains stable, addressing concerns about potential shortages that could affect consumers and industries reliant on sugar.
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The unrestricted ethanol production policy is a game-changer for India’s sugar industry, which has faced challenges balancing domestic demand and export pressures. By allowing mills to freely convert sugarcane derivatives into ethanol, the government aims to bolster energy security, support rural economies, and incentivize sustainable fuel alternatives. Industry experts estimate that this could significantly increase ethanol output, building on the 40 lakh tonnes of sugar diverted for the purpose in the current ESY.
The move also aligns with India’s broader environmental goals, as ethanol blending reduces greenhouse gas emissions and promotes cleaner energy. However, stakeholders will be watching closely to ensure that the increased focus on ethanol does not disrupt sugar prices or availability, especially during peak consumption periods like festivals. As the 2025-26 ESY approaches, the policy sets the stage for a transformative year in India’s biofuel and sugar sectors.
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