Indian distillers seek 9% corn ethanol price hike as feedstock costs surge

Indian grain distillers have asked the government to raise the procurement price for corn-based ethanol by about 9% to 75 rupees/liter, arguing that rising feedstock and financing costs threaten the viability of production just as grain plants are being asked to supply more of the country's blending program.

The All India Distillers' Association (AIDA) said Oct. 27 that the 68.86 rupees/liter effective rate in the oil marketing companies' latest tender was insufficient after domestic corn prices climbed to around 27 rupees/kilogram from 17-18 rupees/kg a year earlier.

"The price of raw material for ethanol has increased. In comparison to that, the price of ethanol has decreased by Indian rupees 3/liter," AIDA President Vijendra Singh said AIDA's annual general meeting, according to a statement issued by the group.

The requested 75 rupees/liter rate would be 6.14 rupees/liter above the latest tender price and 3.14 rupees/liter above the previous effective price of Indian rupees 71.86/liter.

The joint tender from India's state-run oil marketing companies seeks around 11 billion liters of ethanol for the ethanol supply year 2026-27 (November-October).

The tender retained the basic corn-ethanol rate at 66.07 rupees/liter but reduced the additional incentive to 2.79 rupees/liter from 5.79 rupees/liter, lowering the effective procurement price.

Grain share at 90%

India's decision to prohibit ethanol production from sugarcane juice and B-heavy molasses during the new supply year is increasing reliance on corn, damaged grains and surplus Food Corporation of India rice.

Furthermore, India has instructed sugar-producing states to prevent mills and distilleries from producing ethanol from sugarcane juice and B-heavy molasses during the 2026-27 ethanol supply year (November-October), formally enforcing a zero-sugar-diversion policy that shifts more of the country's blending requirement toward grain-based feedstocks.

AIDA hs estimated that the restriction could reduce ethanol supplies from the sugar sector by about 2 billion liters.

Grain-based feedstocks currently account for about 75% of ethanol allocations, with corn providing roughly half of that share, AIDA Deputy Director General Bharati Balaji said at the AGM, according to the statement.

"If there is no diversion for sugarcane, there is a lot of pressure only on corn and FCI broken rice," Bharati said.

The grain share could increase to around 90% during 2026-27, although the balance between corn and FCI rice will depend partly on relative feedstock prices and government allocations, she added.

India has around 20 billion liters/year of installed ethanol-production capacity, of which about 13 billion liters/year is grain-based. Several plants remain below full utilization, while newer distilleries are finding it difficult to secure commercially viable allocations under the latest tender, AIDA said.

More FCI rice sought

AIDA asked the government to increase surplus FCI rice allocations and extend availability beyond the first three quarters of the supply year.

The current tender allows up to 7.2 million metric tons of FCI rice, equivalent to 3.24 billion liters of ethanol. Allocations are capped at 1.08 billion liters during each of the first three quarters, with no FCI rice offers permitted during August-October 2027.

The association has separately sought an increase in the FCI rice-ethanol procurement price from 60.32 rupees/liter, arguing that raw-material, energy, processing and logistics expenses leave limited margins.

AIDA also called for restrictions on corn exports to prioritize domestic users, although the association is still studying the issue.

"First, we should look into and prioritize the domestic market and restrict exports," Balaji said.

The proposal could intensify debate over competing demand from ethanol, poultry, livestock feed and starch producers. Poultry and feed industry groups have sought approval for 5 million mt of duty-free corn imports, citing higher prices and tighter availability.

AIDA opposed importing corn for ethanol production, saying that while imports might improve distillery economics, they would undermine the program's objective of supporting Indian farmers.

The association also called for a long-term roadmap beyond E20, including consideration of E25 and E30 blending, as well as faster deployment of E85 and flex-fuel vehicles.