After ethanol tender pricing setback, sugar industry hopes for review

An industry body for sugar factories has written to the Centre seeking a revision of the tender, which has left procurement prices unchanged from last year, noting that sugarcane prices have gone up

The sugar industry was hit with a surprise a few days back when the first ethanol tender floated by oil marketing companies (OMCs) for the 2025-2026 supply season starting November didn't see any increase in procurement prices.

 

Nonetheless, a section of the industry is hopeful of some form of remedial action, pointing out that in the past, too, ethanol prices have been revised upwards after supply tenders were floated.

 

In the first ethanol tender, procurement prices were kept at the same level as last year's supply season -  which runs November through October - for ethanol produced from sugarcane juice and B-heavy molasses, the two major routes through which ethanol was produced before being stopped to discourage diversion of sugar stock. Prices of these two variants were last revised in 2023.

 

The sugar industry has been pressing for a revision of purchase price as this season's supplies are expected to be good, a projection that has also prompted the central government to lift restrictions on production of ethanol from all forms of molasses.

 

Sugar industry a key supplier

 

According to numbers from the National Federation of Cooperative Sugar Factories (NFCSF), the sugar sector is expected to supply around 4.65 billion litres in the 2025-26 supply tender, or about 44 per cent, of the 10.50 bn litres sought by OMCs.

 

This marks a significant jump from the 2024-25 supply year when the sugar sector contributed roughly 34 per cent of the total requirement.

 

Grains make a play, too

 

Rice - which is increasingly being seen as an alternative source of ethanol - is expected to contribute about 22 per cent, or roughly 2.34 bn litres of ethanol out of the total tendered quantity.

 

This is a sharp jump from the 2024-25 season, when rice supplied about 12 per cent of the total tender.

 

As for maize or corn, NFCSF projections estimated that the sector will contribute around 2.85 bn litres, which is 27 per cent of the total requirement, but almost 18 per cent less than last year. The balance of about 0.66 bn litres is expected to come from damaged foodgrains (DFGs); this will be 6 per cent of the total supplies, down 2 percentage points from 2024-25.

 

Sugar producers seek relief

 

The NFCSF has already written to the consumer affairs secretary seeking a revision in the procurement price for ethanol produced from sugarcane juice/syrup and B-heavy molasses, given that the Fair and Remunerative Price (FRP) of sugarcane has gone up by 16.36 per cent.

 

“In the latest OMCs' ethanol tender, purchase price of ethanol produced from rice has been moved up due to the fact that rice prices itself have gone up since the last two years, (but) the same logic should not be applied for ethanol from cane juice and B-heavy molasses as well,” a senior industry official said.