The Centre’s decision to stop oil companies from buying ethanol made from sugarcane juice, sugar syrup and B-heavy molasses for the 2026-27 supply year could put pressure on sugar mills and distillery investments, National Cooperative Sugar Factories Federation president and former minister Harshvardhan Patil said on Thursday.
Patil called for the decision to be withdrawn and demanded that the procurement price of ethanol made from C-heavy molasses be increased to Rs 70 per litre. The current price for this category is Rs 57.97 per litre, according to the report, limiting the revenue that sugar factories can earn from ethanol production.
The Centre is understood to have introduced the restriction with the stated objective of increasing the availability of sugar in the domestic market. Under the revised arrangement, oil companies will continue buying ethanol produced from C-heavy molasses, while procurement of ethanol made from sugarcane juice, sugar syrup and B-heavy molasses has been stopped.
Patil said the change would affect the financial planning of sugar factories because their distillery divisions could see lower income. He also warned that the viability of projects established for ethanol production could come under pressure if producers lose access to the wider procurement market.
The issue is significant for Maharashtra, where Patil said approximately Rs 40,000 crore has been invested in ethanol production. He put the corresponding investment across India at Rs 1 lakh crore. The figures were cited in his call for the government to consider the financial exposure of factories and lenders that supported the expansion of ethanol capacity.
A sustained reduction in ethanol-related income could create repayment difficulties for sugar factories with loans linked to distillery projects, Patil said. Financial institutions that provided credit for these projects could also face pressure if mills’ revenues weaken and their repayment capacity is affected.
Ethanol has become an important revenue stream for sugar factories because it allows them to diversify beyond sugar production. The procurement restriction therefore affects not only the sale of a fuel product but also the operating assumptions behind investments in distilleries and associated industrial capacity. The reported decision places the immediate policy priority of maintaining domestic sugar availability against the financial expectations created by ethanol investments.
Patil urged the Centre to withdraw the procurement restriction and revise the price of C-heavy molasses-based ethanol to Rs 70 per litre. The report did not specify a government timeline for reviewing the decision or indicate whether the Centre has responded to the federation’s demands.
