OMCs Exclude Sugar Feedstocks from 2026-27 Ethanol Tender and Slash Maize Procurement Price

In a major recalibration of India's biofuel procurement framework, state-run oil marketing companies (OMCs) have completely excluded primary sugar feedstocks from their fresh ethanol procurement tender for the 2026-27 supply year. Floating the quantity-bid tender on October 16 on behalf of the OMC consortium, Bharat Petroleum Corporation Limited (BPCL) announced a procurement target of approximately 11 billion litres (1,100 crore litres) of ethanol for the cycle spanning November 1, 2026, to October 31, 2027.

Alongside the freeze on sugar-based supplies, the government curtailed incentives for grain distillers, bringing down the procurement price of maize-derived ethanol by Rs 3 per litre.

Zero Sugar Diversion Mandate

The tender document specifies that the Government of India has ordered sugar diversion toward ethanol production to be curtailed entirely to zero for the upcoming ethanol supply year (ESY) 2026-27. Consequently, OMCs have invited no bids for ethanol manufactured from sugarcane juice, whole sugar, sugar syrup, or B-heavy molasses.

The participating public sector refiners include:

• Bharat Petroleum Corporation Limited (BPCL)
• Indian Oil Corporation Limited (IOCL)
• Hindustan Petroleum Corporation Limited (HPCL)
• Mangalore Refinery and Petrochemicals Limited (MRPL)
• Numaligarh Refinery Limited (NRL)

The sudden exclusion of B-heavy molasses and cane syrup comes against the backdrop of rising domestic sweetener prices and output concerns driven by erratic monsoon rains across primary cane-growing states, notably Maharashtra and Karnataka. The central government has prioritised safeguarding retail availability and containing food inflation over biofuel blending inputs.

Permitted Feedstocks and Price Revisions

While front-line cane products have been barred, distilleries can still offer ethanol produced from C-heavy molasses, the low-sugar byproduct of conventional refining. To make up the targeted 11 billion litres needed for the nationwide 20% ethanol-blended petrol (E20) mandate, procurement has been redirected toward grain-based alternatives.

The tender outlines the following base pricing structure across eligible feedstocks:

• Maize (Corn): Basic price of Rs 66.07 per litre with an additional incentive of Rs 2.79 per litre, taking the net procurement price to Rs 68.86 per litre (excluding GST and transportation). The incentive previously stood at Rs 5.79 per litre, meaning effective realisations have dropped from Rs 71.86 per litre.
• Damaged Food Grains: Basic procurement price fixed at Rs 64.00 per litre.
• Surplus FCI Rice: Fixed at a basic rate of Rs 60.32 per litre.
• C-Heavy Molasses: Basic rate maintained at Rs 57.97 per litre.

Deliveries for the tender will be staggered across four quarterly tranches: November 2026 to January 2027, February to April 2027, May to July 2027, and August to October 2027.

Impact on Sugar Mills and Grain Distilleries

For India's listed sugar and distillery ecosystem, the revised tender terms present significant commercial disruption. Over the past three years, major mills—such as Balrampur Chini Mills, Shree Renuka Sugars, Triveni Engineering & Industries, and Dalmia Bharat Sugar—had deployed heavy capital expenditure into dual-feed distilleries and dedicated B-heavy molasses ethanol capacities.

The immediate prohibition of B-heavy molasses and cane juice diversion leaves mills with surplus domestic sugar that will have to be sold in the local quota market, likely weighing on domestic ex-mill realization prices. Meanwhile, the Rs 3-per-litre reduction in maize-based ethanol incentives directly squeezes operating margins for standalone grain distillers who have faced elevated raw corn acquisition costs over recent quarters. Analysts expect the twin measures to force lower distillery capacity utilisation across the sector during the 2026-27 cycle.

Tags: BPCL Sugar Sector Ethanol Blending Oil Marketing Companies Agriculture