Ethanol tender sparks feedstock concerns as rice gains ground over maize

The Oil Marketing Companies’ (OMCs) latest ethanol procurement tender for Ethanol Supply Year (ESY) 2026–27 has triggered concerns among grain-based ethanol producers and sections of the sugar industry over feedstock pricing, allocation priorities and the potential implications for the sector.

The tender sets procurement prices at ₹60.32 a litre for surplus foodgrains (SFG), with a stated cap of 108 crore litres for the first three quarters; ₹64 a litre for damaged foodgrains (DFG); and ₹66 a litre for maize, plus an additional ₹2.79 a litre. While ethanol produced from sugarcane juice, sugar syrup and B-heavy molasses has been excluded, C-heavy molasses-based ethanol remains eligible for procurement.

Rice-based ethanol in focus

The Grain Ethanol Manufacturers Association (GEMA) has argued that the tender places a disproportionate burden on rice-based feedstocks, particularly SFG and DFG, while potentially weakening maize’s role as an industrial feedstock.

The pricing differential has also created uncertainty over how procurement demand will be distributed among the different feedstock categories.

According to industry estimates, DFG-based ethanol allocation during ESY 2025–26 was approximately 60 crore litres. For ESY 2026–27, the industry anticipates that the allocation could exceed 700 crore litres.

C.K. Jain, president of GEMA, said 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. He added that the government and OMCs should review the pricing and allocation framework.

GEMA has also questioned whether maize will receive adequate procurement opportunities under the lowest-price-based allocation mechanism. It has called for greater clarity on the methodology for feedstock-wise allocation and the role envisaged for maize in meeting the country’s ethanol requirements.

Sugar industry welcomes curbs, flags allocation preference

The Indian Sugar & Bio-Energy Manufacturers Association (ISMA) has welcomed the exclusion of ethanol produced from sugarcane juice, sugar syrup and B-heavy molasses, arguing that the approach is consistent with the need to safeguard domestic sugar availability amid uncertainty over the forthcoming crop.

C-heavy molasses-based ethanol, it noted, allows sugar mills to continue contributing to the ethanol-blending programme without diverting recoverable sugar.

However, ISMA has raised concerns over the preferential allocation granted to dedicated ethanol plants holding Long-Term Offtake Agreements under the ESY 2026–27 tender.

While the provision is already in place for the current year, its continuation in subsequent years could hurt the sugar industry, the association said.