Government Lifts Ethanol Production Caps for Sugar Mills in 2025-26
The Indian government has removed quantitative restrictions on ethanol production for sugar mills and distilleries for the 2025-26 marketing year. This allows production from sugarcane juice, sugar syrup, B-heavy molasses, and C-heavy molasses. The food ministry will conduct periodic reviews with the petroleum ministry to balance sugar supply and ethanol production. As of July 31, 2025, the average ethanol blending in petrol reached 19.05%. This aligns with the National Policy on Biofuels' accelerated target of 20% ethanol blending by 2025-26.
*this image is generated using AI for illustrative purposes only.
In a significant move for India's sugar and ethanol industry, the government has announced the removal of quantitative restrictions on ethanol production for sugar mills and distilleries during the 2025-26 marketing year, which begins in November. This decision marks a pivotal shift in the country's approach to biofuel production and sugar industry regulation.
Expanded Production Sources
The new notification allows for a more diverse range of ethanol production sources. Sugar mills and distilleries are now permitted to produce ethanol from:
- Sugarcane juice
- Sugar syrup
- B-heavy molasses
- C-heavy molasses
This expanded list of sources provides greater flexibility for producers and potentially increases the overall ethanol output.
Balancing Act: Sugar Supply and Ethanol Production
To maintain equilibrium between domestic sugar supply and ethanol production, the food ministry will conduct periodic reviews in collaboration with the petroleum ministry. This oversight aims to ensure that the increased focus on ethanol does not compromise the availability of sugar for domestic consumption.
Current Ethanol Production Landscape
For the 2024-25 period, the government has set a cap of 40.00 lakh tonnes of sugar for ethanol production. This benchmark provides context for the potential increase in production capacity following the removal of restrictions for the subsequent year.
Progress in Ethanol Blending
As of July 31, 2025, Oil Marketing Companies (OMCs) have achieved a significant milestone in the ethanol blending program:
| Metric | Percentage |
|---|---|
| Average ethanol blending in petrol | 19.05% |
This achievement demonstrates substantial progress towards the national biofuel targets.
National Biofuel Policy: Accelerated Targets
The decision to remove ethanol production restrictions aligns with the broader objectives of India's biofuel policy:
- The National Policy on Biofuels 2018, amended in 2022, has advanced the target for 20% ethanol blending in petrol.
- Original target year: 2030
- Revised target year: 2025-26
This policy acceleration underscores the government's commitment to reducing fossil fuel dependence and promoting sustainable energy alternatives.
Implications for the Industry
The removal of quantitative restrictions is expected to have far-reaching effects on the sugar and ethanol sectors:
- Increased ethanol production capacity
- Potential for reduced sugar surpluses
- Enhanced revenue streams for sugar mills
- Boost to India's energy security and environmental goals
As the 2025-26 marketing year approaches, industry stakeholders will be closely monitoring the impact of this policy change on both sugar availability and ethanol production levels. The government's periodic reviews will play a crucial role in maintaining the balance between these two important sectors of the Indian economy.
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