NEW DELHI — The Indian sugar sector is under strain after the government decided to leave ethanol prices from sugarcane-based feedstocks unchanged for Ethanol Supply Year (ESY) 2025–26, even as it approved a 3% price hike for ethanol made from surplus FCI rice.
On Tuesday, state-run oil marketing companies (OMCs) floated tenders to procure 1,050 crore litres of ethanol for the upcoming supply year beginning November.
Rice-Based Ethanol Sees Price Revision
For ESY 2025–26, the government has set the price of ethanol made from surplus rice sourced through the Food Corporation of India (FCI) at ₹60.32 per litre, up from ₹58.50 in the previous year. The increase reflects higher procurement costs of surplus rice, now fixed at ₹23.20/kg, compared to ₹22.50/kg earlier.
Supply is scheduled in phases:
- November 2025: 100 crore litres
- Dec 2025 – Jan 2026: 200 crore litres
- Feb – Apr 2026: 280 crore litres
- May – Jul 2026: 250 crore litres
- Aug – Oct 2026: 220 crore litres
This adjustment provides relief to grain-based ethanol producers but leaves sugar-based ethanol manufacturers disappointed.
No Relief for Sugarcane-Based Ethanol
Ethanol prices derived from sugarcane juice, syrup, molasses, maize, and damaged grains remain unchanged from ESY 2024–25:
- Sugarcane juice/syrup ethanol: ₹65.61/litre
- B-heavy molasses ethanol: ₹60.73/litre
- C-heavy molasses ethanol: ₹57.97/litre
- Damaged foodgrains ethanol: ₹64/litre
- Maize ethanol: ₹71.86/litre
Industry experts argue this stagnation will hurt sugar mills, especially as the Fair and Remunerative Price (FRP) for sugarcane was raised for SSY 2026, raising raw material costs without a matching increase in ethanol prices.
Margin Squeeze for Sugar Mills
According to Centrum Capital analyst Shailesh Kanani, the decision is a setback for integrated sugar companies:
“We had expected at least a 3% upward revision in sugar-based ethanol prices, in line with the FRP hike. Without it, mills will face tighter margins.”
The absence of price parity with maize- and grain-based ethanol also raises concerns about policy consistency and long-term visibility for the sugarcane ethanol value chain.
Industry Outlook
With higher cane procurement costs and stagnant ethanol realizations, sugar mills face a profitability squeeze going into ESY 2025–26. While grain-based ethanol producers benefit from the rice price revision, sugar-based ethanol manufacturers may need to rely more heavily on government intervention in future policy rounds.
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