Sugar Industry Body Raises Alarm Over Reduced Ethanol Quota from Sugar-Based Feedstocks

The Indian Sugar & Bio-Energy Manufacturers Association (ISMA) has voiced serious concerns regarding the central government's recent decision to decrease the share of ethanol derived from sugar-based feedstocks in the country's overall ethanol production targets. For the upcoming Ethanol Supply Year (ESY) 2025-26, the government plans to limit sugar-based ethanol to just 28% (289 crore litres) of the estimated total production of 1,050 crore litres. This marks a substantial reduction from the ESY 2024-25 quota of 315 crore litres, which represented 33% of the total production. ISMA highlights a consistent decline in the sugar sector's allocation for ethanol, from 91% in 2019-20 to the current low of 28%.

According to ISMA, this drastic reduction threatens to cause underutilization of distilleries, reduce the diversion of sugar for ethanol production, lead to surplus sugar stocks in the domestic market, and potentially increase cane arrears owed to farmers. The sugar industry has invested over ₹40,000 crore to build more than 900 crore litres of ethanol production capacity, often guided by government roadmaps like NITI Aayog's 2021 projection which anticipated a significant contribution from the sugar sector.

ISMA has urged the government to rebalance ethanol allocation, advocating for at least a 50% share for sugar-based feedstocks, aligning with earlier projections. The association also requested an immediate allocation of 150 crore litres of ethanol from sugarcane juice and B-heavy molasses during the next tender.

Impact: The government's decision to curtail the share of sugar-based ethanol could negatively affect sugar manufacturing companies by leading to surplus sugar production and potentially lower prices. Ethanol producers might face underutilization of their facilities. This also impacts India's energy security goals and targets for biofuel blending, potentially requiring alternative feedstock strategies. The farmers could face delays in payments due to surplus sugar stocks. Rating: 6/10.

Difficult Terms: Ethanol: A type of alcohol used as fuel, often blended with gasoline. Feedstock: Raw material used for production. In this context, sugar crops or their derivatives. Quota: A fixed quantity or share allocated for a specific purpose. Ethanol Supply Year (ESY): A defined period (usually Oct-Sep) for ethanol supply management. Distilleries: Facilities for producing alcohol through fermentation and distillation. Sugar Diversion: Using sugar or byproducts for ethanol production instead of direct sugar sales. Cane Arrears: Outstanding payments owed to sugarcane farmers. B-heavy molasses (BHM): A viscous byproduct from sugar refining, used as a feedstock for ethanol. NITI Aayog: National Institution for Transforming India, a government policy think tank.