Sugar sector hit as ethanol prices from cane feedstocks remain unchanged
The government raised FCI rice-based ethanol prices to ₹60.32/litre for ESY 2025-26, benefiting grain-based producers, while sugar-based ethanol rates remain unchanged. Oil marketing companies invited bids for 1,050 crore litres. Sugar mills face margin pressure as higher sugarcane costs aren’t offset, sparking concerns over policy support for sugarcane-based ethanol production.
In a setback for the sugar industry, the government has increased the prices of FCI rice-based ethanol, while keeping the cost of ethanol produced from sugar-based feedstocks unchanged for Ethanol Supply Year 2025-26 (November-October).
The government increased the price of FCI rice-based ethanol, providing relief for grain-based ethanol producers. On Tuesday, the oil marketing companies (OMCs) invited bids for the supply of 1,050 crore litres of Ethanol for ESY 2025-26.
The price of ethanol produced from surplus rice sourced from FCI has been fixed at ₹60.32 per litre for ESY 2025–26, compared to ₹58.50 per litre for ESY 2024–25, an increase of around 3 per cent. The revision corresponds to the increase in the rate of surplus rice for ethanol from FCI.
The reserve price for the sale of rice to ethanol distilleries for the production of ethanol is fixed at ₹23.20 per kg ex FCI Godown, *against the previous rate of ₹22.50/kg.*.
According to the supply schedule, 100 crore litres are to be supplied in November 2025, and 200 litres in December 2025 and January 2026.
The remaining is divided into three quarters—February-April 2026 (280 crore litres), May-July 2026 (250 crore litres) and August-October 2026 (220 crore litres).
No change in sugarcane ethanol rates
Shailesh Kanani from Centrum Capital stated that the government’s decision to maintain ethanol procurement prices from sugar-based feedstocks unchanged for ESY 2025-26 represents a setback for integrated sugar players.
“Our base case had factored in at least a 3 per cent upward revision in these prices, in line with the increase in the Fair and Remunerative Price (FRP) of sugarcane announced for SSY26,” he added.
Sugar mills face margin squeeze
Centrum Capital said that the lack of pass-through will compress margins for sugar mills that rely heavily on sugarcane- and molasses-based ethanol production.
Higher sugarcane costs will not be offset by higher realisation from ethanol. Beyond the near-term financial impact, this also raises broader concerns about the visibility of policy support for the sugarcane-based ethanol value chain. The sugar industry has been demanding price parity with maise ethanol.
The price of ethanol produced from sugarcane juice/ syrup was ₹65.61 per litre in ESY 2024-25 and remains unchanged in ESY 2025-26.
Similarly, the rate of ethanol produced from B heavy molasses (BHM) and C heavy molasses (CHM) was ₹60.73 per litre and ₹57.97 per litre, respectively. These have also not been raised in ESY 2025-26.
The price of ethanol produced from damaged foodgrains was ₹64 per litre in ESY 2024-25, and the same price was maintained in ESY 2025-26. The prices of ethanol produced from maize remain unchanged at ₹71.86 per litre.
To Read more about Sugar Industry continue reading Agriinsite.com
Source : The Hindu Business line
