NEW DELHI: Government is set to disallow diversion of sugarcane juice, syrup and B-heavy molasses for ethanol production in the 2026-27 ethanol supply year (ESY) starting November, amid an around 11% shortfall in sugar production from initial estimates for the 2025-26 sugar season and indications of a further decline in output due to drought in major sugarcane-growing states of Maharashtra and Karnataka.TOI has learnt that government will notify the decision soon, ahead of the start of the new ESY. While ethanol supply year runs from Nov 1 to Oct 31, sugar season in India runs from Oct 1 to Sep 30. Government specifies the quantity of sugarcane juice, syrup and B-heavy molasses that can be diverted for ethanol production to meet the mandatory blending target for the green fuel in petrol.The move comes at a time when domestic sugar supplies remain tight. Mills diverted about 30 lakh tonnes of sugar, or around 10% of total output, for ethanol production during the sugar season that ended on September 30. The new sugar season began on October 1 with opening stocks of around 37.5 lakh tonnes, compared with nearly 50 lakh tonnes a year ago.Industry sources said there was no scope for allowing further diversion of sugarcane juice, syrup and B-heavy molasses for ethanol, as ensuring adequate domestic sugar supplies remains a priority for both govt and mills. With the possibility of a fall in output in the current season, particularly in Maharashtra and Karnataka, government would prioritise sugar availability over additional diversion for ethanol.Disallowing the use of sugarcane juice, syrup and B-heavy molasses for ethanol in 2026-27 would enable mills to produce more sugar from the available cane, helping augment domestic supplies and meeting consumption requirements.Government has said that the share of sugar diverted for ethanol has declined from around 12% in 2022-23 to around 9% in 2025-26. Besides, nearly three-fourths of ethanol produced in the country now comes from grains, particularly maize, reducing the dependence on sugar-based feedstock.
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“Meeting the demand for 20% ethanol blending in petrol won’t be an issue. With indications of millers getting a better price, it won’t be a problem for them either. Government would have to continue with the ban on exports and may have to allow more imports as well,” an industry analyst said.Sugar production in the 2025-26 season was hit by crop diseases, waterlogging and adverse weather in key producing states. Against the initial production estimate of around 343 lakh tonnes, output was estimated at around 306 lakh tonnes in August, including the quantity diverted for ethanol production.After accounting for the diversion to ethanol, net sugar production in 2025-26 was around 279 lakh tonnes, barely enough to meet the normative domestic consumption requirement of 280-285 lakh tonnes.