Ethanol makers slam OMCs' 2025-26 supply tender over allocation policy

The recent allocation of ethanol by Oil Marketing Companies (OMCs) for the 2025-26 supply year against a tender of 10.50 billion litres has drawn flak from both grain ethanol makers as well as those who produce ethanol from sugarcane for a variety of reasons.

 

While the Grain Ethanol Manufacturers Association (Gema), in a statement issued on Thursday, questioned the allocation policy saying that it has left surplus zones unrepresented, the Indian Sugar and Bio-Energy Manufacturers Association (Isma), in its statement issued a few days back, said limited allocation for ethanol produced from sugarcane would have serious negative impact on the sector.

 

A few days back, OMCs had floated a tender for supply of around 10.50 billion litres of ethanol for the 2025-26 supply year that will start from November. The supplies were for meeting the Centre’s 20 per cent blending target.

 

Against this, offers of 17.76 billion litres from distilleries were received, which was reflective of the surplus capacity in the sector.

 

Gema said a serious imbalance in the ethanol procurement process is threatening the viability of hundreds of existing distilleries.

 

It said as per the allocations made against the tender, industry players are raising concerns about the methodology, which has favoured new entrants in deficit zones while sidelining operational units with surplus capacity.

 

Gema said while the policy appears to support local sourcing, the allocation methodology bypasses distilleries that were established with understandings such as Long-Term Offtake Agreements (LTOAs), which would deprive over 350 grain-based ethanol units of fresh orders.

 

“This situation has sparked frustration among existing distilleries which invested heavily based on the promise of consistent government demand under the Ethanol Blended Petrol (EBP) programme,” said C K Jain, president, Gema.

 

Isma said in the recent tender, the sugar sector was allocated just 2.89 billion litres against an offer of 4.72 billion litres.

 

With ethanol supplies of 2.89 billion litres, just around 3.4 million tonnes of sugar will get diverted while the requirement was for diverting around 5 million tonnes.

 

According to preliminary Isma estimates for the 2025-26 sugar season (October-September), India’s sugar production is expected to reach 34.9 million tonnes, reflecting an almost 18 per cent increase over last year, against the estimated domestic sugar consumption of 28-28.4 million tonnes for the same period.

 

“Such limited and unexpected allocations are likely to cause serious negative impacts for the sugar sector that include underutilisation of distillery capacities, affecting operational and financial efficiency, and increase in surplus sugar, putting downward pressure on domestic prices and liquidity,” Isma said. It added that all this could impact the lives of almost 5.5 crore sugarcane farmers, and lead to build-up of cane arrears.