Sugar Industry Faces Pressure as Ethanol Prices Remain Unchanged

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.

Make money without lifting your fingers: Start using a world-class auto trading solution.

EightCap, your trusted Partner in CFDs, Cryptocurrencies and Stocks.