INTERVIEW: India’s sugar mills call for higher ethanol blending amid oil supply risk

India's sugar industry has urged the government to raise ethanol blending in gasoline, arguing that domestic capacity far exceeds current demand and could help protect the country from energy shocks amid geopolitical turmoil.

India's ethanol distillation capacity has reached about 20 billion litres, but oil marketing companies are purchasing only 10.5 billion litres -- roughly half of what the industry can supply, Atul Chaturvedi, executive chairman of Shree Renuka Sugars, said.

"There is no reason why, if the blending ratio is jacked up, we could not absorb all 20 billion litres," Chaturvedi told Platts, part of S&P Global Energy, in an interview on the sidelines of the launch of a trade initiative called Asia Africa Agri Alliance on March 13.

India currently blends about 20% ethanol with gasoline. Chaturvedi said the industry is ready to exceed the target, citing Brazil, where ethanol makes up nearly half of petrol, and flex-fuel vehicles, which can run on higher ethanol blends, are quite common.

"Brazil has shown the way. If India adopts flex-fuel cars, it will reduce dependence on imported oil and provide a stable outlet for the sugar industry," Chaturvedi said. "The same automobile manufacturers operating in Brazil are also present in India. The technology is proven. What is needed is the right kind of push from the government".

During the 2024-25 supply year (October-September), more than 10 million kiloliters (10 billion liters) of ethanol were blended, resulting in an average blending rate of 19.24% ethanol in gasoline, India's Minister of State for Petroleum and Natural Gas Suresh Gopi said in December.

State-owned oil marketing companies invited bids this year to supply 10.5 billion liters of denatured anhydrous ethanol for the 2025-26 supply season.

Sugar diversion potential

Currently, the sugar industry can comfortably divert 7–8 million metric tons of sugar annually to ethanol, compared with just 3.1–3.2 million mt now. "There is a huge scope to expand without affecting food supplies," Chaturvedi said, adding that higher blending would help absorb surplus sugar and stabilize prices.

India is expected to produce 32.4 million mt of sugar in the marketing year 2025-26 (October – September), up 12% from the previous year, according to the latest estimate by the Indian Sugar & Bio-energy Manufacturers Association.

However, the pricing disparity between sugar ethanol and ethanol from alternative feedstocks has been an issue for the industry, Chaturvedi said.

The industry has raised concerns over pricing. OMCs Rupees 72 rupees per litre ($0.78/liter) for maize-based ethanol, compared with 65 rupees for ethanol from sugarcane juice and 60 rupees for B-heavy molasses. "The sugar industry feels cheated. Cane prices have been rising steadily due to government policy, but ethanol and sugar prices have not kept pace. This makes the economics difficult for mills," Chaturvedi said.

Currently, about 9 million kiloliters of ethanol are produced from sugar-based feedstocks, and around 10 million kiloliters are derived from grains, such as rice and maize.

Middle East war concerns

India imports most of its crude oil and fertilizers from Middle Eastern countries, making it vulnerable to supply disruptions, Chaturvedi said.

"Right now, all our eggs are in one basket. The situation is disturbed, and it is reflected in the news. India must take proactive action to ensure energy security to the extent possible, and domestic sources should be fully exploited," he said.

He added that while fertilizer supplies are currently adequate, the government should explore alternative sourcing options ahead of the kharif season in June–July. "We don't anticipate supply chain issues to persist until then, but energy dependence is a major vulnerability," he said.

Platts assessed anhydrous ethanol shipment two months ahead up $3/mt at $715/mt, CFR India March 10, for May shipment.