Ethanol blending programme: Grains to make up for lower sugar production

Grains look to surpass sugarcane again as the primary feedstock for ethanol, a process that may be helped by government incentives to convert mills into dual-feed ones

One of the fallouts of plunging sugar production numbers in India is whether the country will have adequate quantities of ethanol for its blending programme in the 2024-25 supply season that ends on October 31, 2025. The question now facing policymakers is whether they need to make a mid-season course correction to ensure that the programme is not jeopardised.

 

Already, as per some industry estimates, total sugar diverted for producing ethanol is now expected to be around 3.2-3.5 million tonnes (MT), lower than the estimated 4 MT at the start of the season.

 

The Indian Sugar and Bio-Energy Manufacturers Association (Isma) had in a statement issued a few months earlier said that it expects 3.5 MT of sugar to be diverted towards ethanol; in January, that number had reached 3.7 MT.

 

Ethanol supplies to be unaffected

 

However, industry sources said that total ethanol supplies are unlikely to be dented, since any shortfall of ethanol from sugarcane can be made up by grains.

 

This would ensure that the blending programme continues unabated and the predetermined target of mixing almost 20 per cent of ethanol with petrol is reached without any hindrance.

 

In ethanol supply year (ESY) 2024-25, as on March 9, 2025, supplies of around 9.96 billion litres of ethanol have been allocated by oil marketing companies (OMCs). Of this, around 66 per cent will have to come from grains while the balance, or about a third of the total, is expected to come from sugarcane.

 

Of this, till March 9, sugar mills have supplied 1.51 billion litres of ethanol while grain-based distilleries have supplied an almost equal amount of 1.51 billion litres. In total, around 3.02 billion litres of ethanol have been supplied to OMCs till March 9, 2025.

 

This has ensured a blending of percentage of 18.08 per cent as per industry estimates.

 

Also, several sugar mills have converted their distilleries into multi-feed ones which gives them the option of changing the feedstock from cane to grains mid-season.

 

“This, in turn, would ensure that ethanol supplies continue unabated even if molasses supplies go down,” a senior industry official said, adding that procurement rules have been suitably tweaked to make such a mid-season switch between the two feedstocks.

 

Most sugar mills need roughly Rs 50-60 crore to convert their molasses-based plants into dual-feed ones.

 

To ease the transition, the Centre’s recent notification of a scheme which would make cooperative sugar mills eligible for subsidised loans for converting existing sugarcane-based ethanol distilleries into dual-feed ones could also come in handy, sources said.

 

The scheme, notified a few weeks ago, makes cooperative sugar mills in the country with distillation capacity eligible for the lower of 50 per cent interest subvention on project loans or 6 per cent on loans extended by banks or financial institutions. The interest relief is applicable for a period of five years, including a one-year moratorium.

 

Industry players said that as most cooperative sugar mills get loans through the National Cooperative Development Corporation (NCDC), which charges them an interest of about 8.5 per cent, the actual rate of interest for the borrowers after the subvention scheme would be somewhere around 4.25 per cent.  

 

Gradual shift to grains

 

However, some industry players pointed out that if grains continue to be the main feedstock for producing ethanol in the 2024-25 ethanol supply year (ESY) as well, this would be the second consecutive year that grains would outnumber sugarcane-based molasses as the main feedstock on which India’s ambitious ethanol blending programme rests.

 

“This to me is an area of concern because just a few years back, sugarcane was the main source for making ethanol in India which is now being gradually taken over by grains,” a senior industry official said.

 

He said a prime reason for this is that, for the past two seasons, the Central government has not significantly raised the price that oil marketing companies (OMCs) paid for procuring ethanol from sugarcane while the same was not the case when it came to ethanol produced from grains. The fact that the Centre had in December 2023 prohibited sugar mills from producing ethanol from sugarcane juice had also contributed in keeping the share of sugarcane low in total ethanol supplies.

 

IN ESY 2024-25, the procurement price of ethanol produced from C-heavy molasses was raised by only 3 per cent while that of ethanol produced from B-heavy molasses and sugarcane juice was kept unchanged.

 

This, several industry players had said at the time, was a ‘precautionary’ measure to encourage mills to produce more ethanol from the process that diverts the least amount of actual sugar.

 

However, until only a few years ago, sugarcane was the main feedstock for India’s ethanol blending programme.

 

In ESY 2022-23, out of the 5.06 billion litres of ethanol supplied for achieving 12 per cent blending, 3.69 billion litres or around 73 per cent came from sugarcane while the balance was from grains.

 

However, things started changing from ESY 2023-24, when out of the 6.20 billion litres of ethanol needed for almost 15 per cent blending, around 3.59 billion litres or around 58 per cent came from grains-based sources - mostly maize and damaged food grains - while the balance 42 per cent came from sugarcane.

 

This was also the first year that grains overtook sugarcane as the main feedstock; the trend is expected to be repeated in ESY 2024-25 as well but with on a much larger scale.

 

As per a Parliamentary Standing Committee report tabled a few years back, of the different feedstock through which ethanol is produced in India, rice gives the maximum yield of 450 litres per tonne, followed by maize at 380 litres.