India’s ethanol supply reached 987 crore litres for the 2025-26 season, achieving an 82.5% execution rate. The sector is now heavily reliant on grain-based feedstocks like maize and rice, which account for over 70% of the total supply. This shift allows sugar mills to maintain consistent output, but investors should monitor raw material price volatility and potential government policy changes regarding the use of food grains for fuel.
India’s push to blend ethanol with petrol has reached a new milestone, with supply touching 987 crore litres by the end of September 2026. This performance marks an 82.5% execution rate against the total contracted allocation of 1,197 crore litres for the 2025-26 supply year. The data highlights a clear structural shift in the industry, as grain-based feedstocks have become the primary driver of production.
Grain-Based Production Dominance
Grain-based distilleries supplied 705 crore litres of ethanol, representing more than 71% of total receipts. Maize has emerged as the central pillar of this strategy, contributing 413 crore litres. Additionally, the Food Corporation of India (FCI) provided surplus rice, which added 222 crore litres to the total supply. While the sugar sector remains a vital part of the energy mix, providing 282 crore litres with a high 97.6% fulfillment rate, the reliance on grains has increased to ensure the program meets its ambitious blending targets.
Strategic Shift for Sugar Mills
For sugar companies, the ability to switch between feedstocks is becoming a critical business advantage. Historically, sugar mills relied solely on sugarcane juice or molasses. However, unpredictable sugarcane output due to weather conditions or regulatory export curbs often threatened their profitability. By investing in multi-feedstock distilleries that can process maize and rice, companies like Balrampur Chini Mills and Triveni Engineering are attempting to smooth out their operational cycles. This diversification helps maintain revenue flow even when the sugar harvest is lower than expected.
Risks and Market Monitorables
While the growth in grain-based ethanol is positive for the sector, it introduces new risks that investors should track. The most significant concern is the government's stance on food security. In the past, the central government has periodically restricted the use of rice for ethanol production to keep food prices stable during inflation spikes. Any sudden regulatory change that limits the availability of FCI rice can lead to an immediate supply shortage for distilleries.
Furthermore, maize prices are subject to market volatility. As the demand for maize rises for both ethanol production and animal feed, increased competition can drive up procurement costs, which may put pressure on profit margins for standalone grain-based distilleries. Investors should also watch for updates on the government's pricing policy for ethanol procurement, as this directly dictates the profitability of these projects. The future success of this program will depend on the consistent availability of affordable raw materials and the government's commitment to maintaining stable policy guidelines for the energy sector.