Facing persistently low sugar prices, many sugarcane mills are increasingly turning to ethanol production as a strategic alternative to stabilize revenues and manage stock surpluses. Policy changes unlock ethanol flexibility
The Indian government recently removed quantitative restrictions on ethanol production from sugarcane juice, syrup, and all forms of molasses for the 2025‑26 ethanol supply year. This lets mills choose freely between sugar and ethanol production. Surplus sugar & weak pricing drive shift
Global sugar prices have remained under pressure, squeezing mrgins for domestic producers. As a result, many mills see ethanol as a more viable outlet to monetize cane and reduce stock burdens. Ethanol margins under strain too
While mills want to divert more sugar to ethanol, returns are not always attractive. The lack of price hikes in ethanol procurement has dampened enthusiasm, especially when input costs are rising. Industry push for better ethanol pricing
Cooperatives and trade bodies are lobbying for upward revision in ethanol prices, arguing that current rates lag behind cost escalation and discourage further diversion. Diversion estimates rising Analysts expect sugar diversion to ethanol to climb in the upcoming season as mills leverage newfound flexibility. Some project diversion could reach 5 million tonnes to absorb excess sugar and ease price pressures.
Revenue stabilization for mills
Ethanol production offers a quicker cash cycle compared to selling sugar domestically or exporting, which can help mills clear cane payments to farmers faster.
Stock moderation
Diverting sugar to ethanol may help reduce accumulated unsold inventories, which otherwise weigh on market prices.
Policy sensitivity
The success of this pivot depends heavily on government support — in particular, ethanol pricing, blending mandates, and regulation of sugar exports or quotas. Caution on margins
If ethanol prices don’t keep pace with input inflation, mills could find themselves with slim or negative margins—even in ethanol.
Longer‑term structural change
Over time, we could see a more permanent rebalancing in the sugar‑ethanol mix, especially if global sugar prices remain weak and blending targets keep rising.
