India considers restricting sugarcane use for ethanol to stabilize sugar prices

The Indian government is evaluating a shift in its green fuel strategy to address rising sugar prices and potential shortages caused by poor rainfall in states like Maharashtra and Karnataka. To stabilize the domestic market and prevent reliance on expensive imports, officials are considering restricting the amount of sugarcane diverted to ethanol production. Such a move could add approximately 3 million metric tons to the sugar market, potentially cooling prices that have recently increased by 10%.

To maintain the 20% ethanol blending target, the government may shift feedstock focus toward corn and rice stocks. There are also discussions regarding instructing sugar mills to use only ‘C-heavy’ molasses for ethanol rather than high-quality cane juice.

While the diversion of surplus sugar to ethanol has previously improved the financial viability of sugar mills and enabled timely Fair and Remunerative Price (FRP) payments to farmers, the policy faces criticism. Opposition leaders have raised concerns regarding food and water security, noting that sugarcane-based ethanol production is highly water-intensive. Additionally, questions have been raised regarding the subsidies provided to distilleries.