The Indian government has removed the cap on ethanol production for the Ethanol Supply Year (ESY) 2025-26, allowing sugar mills and distilleries to freely produce ethanol from sugarcane juice, syrup, and both B-Heavy and C-Heavy molasses. This marks a complete lift of quantitative restrictions compared to prior years
Policy Details and Market Reaction
- Expanded production freedom: Starting this year, there will be no restrictions on ethanol output derived from diverse sugarcane derivatives, reflecting strengthened confidence in sugar availability
- Sugar stocks climb: Following the announcement, shares of Rajshree Sugars, Balrampur Chini Mills, Shree Renuka, and other major players surged—some by as much as 20%—due to optimistic revenue outlook tied to increased ethanol demand
Why This Matters
- Ethanol blending push: India aims to reach 20% ethanol blending in petrol by 2025-26. Removing the cap provides necessary supply-side support to sustain and exceed this target
- Farmer and industry benefits: The sugar industry hailed the move as a “jackpot for farmers,” promising timely cane payments, price stability, and improved margins from ethanol production.
- Balanced in energy mix: Alongside ethanol policy, India is redirecting surplus rice—nearly 5.2 million metric tons—towards ethanol, helping manage agri-stocks and accelerate renewable fuel adoption.Reuters
Summary Table
| Factor | Insight |
|---|---|
| Freedom for producers | Unrestricted ethanol production from sugar derivatives opens new quarters. |
| Stock market response | Sugar stocks spiked up to 20% on bullish outlook. |
| Renewable goals | Supports India’s bold ethanol blending ambitions. |
| Farmer upliftment | Promises better cane prices and assured payments. |
