India’s state-run oil marketing companies (OMCs) have excluded ethanol produced from sugarcane juice, sugar, sugar syrup and B-heavy molasses from their procurement tender for the 2026–27 supply year, directing that sugar diversion for ethanol production be reduced to zero.
The tender, dated October 16, 2026, invites bids for approximately 1,100 crore litres of denatured anhydrous ethanol for delivery between November 1, 2026, and October 31, 2027. Eligible feedstocks include maize, C-heavy molasses, damaged food grains, surplus rice sourced from the Food Corporation of India (FCI) and other feedstocks permitted under India’s National Policy on Biofuels.
The restrictions apply to procurement under the current tender and come amid concerns over domestic sugar availability and prices. The revised feedstock eligibility and pricing structure could influence supply strategies among ethanol producers serving India’s fuel-blending programme.
Maize and Grain-Based Ethanol Remain Eligible for Procurement
The tender sets different basic procurement rates according to the feedstock used for ethanol production, with maize-based ethanol receiving the highest listed basic rate among the specified categories.
Transportation charges and applicable GST will be payable separately from the basic procurement rates. Ethanol produced from other eligible feedstocks under the National Policy on Biofuels will be procured at the lowest prevailing rate specified under the tender.
The pricing structure differentiates procurement costs across eligible feedstocks and provides producers with a framework for assessing supply economics for the coming ethanol supply year.
Five State-Run Oil Companies to Procure Ethanol
The tender has been issued by five public-sector oil companies: Indian Oil Corporation, Bharat Petroleum Corporation, Hindustan Petroleum Corporation, Mangalore Refinery and Petrochemicals, and Numaligarh Refinery.
Bids for ethanol made from surplus FCI rice will not be accepted for the fourth quarter, introducing a further restriction on the feedstock’s availability within the tender’s annual procurement schedule.
Ethanol Allocations Subject to Pending Court Proceedings
The tender states that allocations for the first quarter of the 2026–27 supply year will remain subject to the outcome of pending legal proceedings concerning the OMCs’ ethanol allocation methodology.
The participating companies have reserved the right to revise, reduce, withdraw or cancel allocations in accordance with court orders. The tender also excludes liability for compensation to suppliers in such circumstances.
In addition, suppliers must offer ethanol manufactured from eligible indigenous feedstocks at their own registered or approved distilleries. Trading in ethanol or sourcing it from third parties for onward supply to the OMCs is not permitted under the tender conditions.
These provisions establish requirements for feedstock eligibility, production origin and allocation compliance during the upcoming supply year.
Bioenergy Business Analysis
India’s 2026–27 ethanol procurement tender places renewed emphasis on feedstock selection, with sugar-derived routes excluded from the specified procurement framework and grain-based ethanol and C-heavy molasses remaining eligible. The change could affect how distillers allocate production capacity, source raw materials and evaluate returns from supplying ethanol to public-sector fuel retailers.
Maize-based ethanol carries a basic procurement rate of ₹66.07 per litre, rising by ₹2.79 per litre through the specified incentive before GST and transportation charges. The rates for damaged food grains and surplus FCI rice also establish alternative procurement pathways, while C-heavy molasses remains eligible at a basic rate of ₹57.97 per litre.
The implications for individual producers will depend on feedstock availability, plant configuration, operating costs, logistics and the final allocation of supply volumes. The tender’s quarterly structure and restrictions on FCI rice bids in the final quarter may also influence procurement planning.
The overall outcome will depend on how much eligible ethanol suppliers offer and how OMCs allocate the targeted 1,100 crore litres. Pending court proceedings concerning the allocation methodology remain another factor to watch. The restrictions announced in this tender should not, by themselves, be interpreted as a permanent prohibition on sugar-based ethanol across all future procurement periods.
