Centre’s ethanol policy hits Maharashtra sugar mills, farmers
Maharashtra’s sugar industry could lose over ₹7,000 crore after the Centre restricted ethanol procurement from sugarcane juice, syrup and B-heavy molasses for 2026–27. The decision threatens mill liquidity, ethanol plant utilisation and timely farmer payments, prompting demands for higher sugar prices and financial assistance.
Mumbai: Maharashtra’s sugar industry is facing another financial setback after the Centre’s latest policy decision effectively stopped oil marketing companies from procuring ethanol produced from sugarcane juice, syrup and B-heavy molasses for the current year. The move threatens to deprive sugar mills of an estimated Rs 7,000 crore in revenue, adding to their financial difficulties amid expectations of lower sugar production this season and raising concerns over timely payments to sugarcane farmers, Hindustan Times reported.
The decision is aimed at increasing domestic sugar availability to contain price increases ahead of the festive season and the coming year. However, restricting ethanol production from these three sugarcane-based feedstocks is expected to hit a crucial source of revenue and liquidity for sugar mills.
According to estimates presented to Chief Minister Devendra Fadnavis for the 2026-27 sugar season, Maharashtra is expected to have around 99 million tonnes of sugarcane available for crushing. Sugar production was projected at 9.6 million tonnes after diverting 1.5 million tonnes of sugar towards ethanol production.
However, the early commencement of the crushing season and lower cane yields are expected to reduce the state’s sugar production by around 1.8 million tonnes. Against this backdrop, sugar mills have sought financial assistance for drought-hit farmers and factories, an increase in the minimum selling price (MSP) of sugar from the existing Rs 31 per kg to Rs 45 per kg, assistance of Rs 1,000 per tonne for sugarcane farmers and Rs 500 per tonne for sugar mills.
The Centre’s one-year restriction on ethanol production from sugarcane juice, syrup and B-heavy molasses has been implemented through procurement conditions in tenders issued to oil marketing companies, rather than through a direct ban. Under these conditions, the companies will not procure ethanol produced from these three feedstocks but can continue purchasing ethanol made from other crops and C-heavy molasses. However, C-heavy molasses accounts for only around 4% of ethanol production in the sugar industry.
According to the Maharashtra State Cooperative Sugar Factories Federation Ltd, sugar factories have an installed ethanol production capacity of around 3,750 million litres. During the 2025-26 season, they supplied 1,250 million litres, utilising around 30% of their installed capacity.
“At an average rate of Rs 60 per litre, the total revenue received from ethanol sales was around Rs 7,500 crore,” a sugar industry expert said.
The expert said the Centre had effectively restricted procurement through the tender conditions imposed on oil marketing companies. The resulting loss of demand for ethanol made from sugarcane juice, syrup and B-heavy molasses could cost Maharashtra’s sugar factories more than Rs 7,000 crore this year, further worsening their financial position.
Farmer leader Raju Shetti said the decision would adversely affect the cash flow of sugar factories, which rely on ethanol revenue to support payments to sugarcane farmers.
“The government should increase the price of ethanol produced from C-heavy molasses to Rs 70 per litre to minimise the financial damage,” he said.
Harshvardhan Patil, president of the National Federation of Cooperative Sugar Factories (NFCSF), said Maharashtra’s sugar factories had invested more than Rs 35,000 crore in ethanol production plants in response to the Centre’s policy of promoting ethanol blending in petrol.
“Ethanol has helped India save foreign exchange on fuel imports and has also become a source of revenue for sugar factories and farmers,” he said.
Patil warned that the new policy could leave much of the industry’s ethanol production capacity underutilised, as C-heavy molasses accounts for only a small share of ethanol production. He said the Centre should have reduced the permitted quantity of diversion from sugarcane juice, syrup and B-heavy molasses instead of completely stopping procurement from these feedstocks.
NFCSF Managing Director Prakash Naiknavare, however, said the restriction was applicable only for the current year and expressed hope that the policy would change in 2027.
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Source : ChiniMandi
