After curbs on sugarcane, government restricts use of rice for ethanol

The government has placed separate limits on two non-sugar feedstocks used for ethanol: surplus rice held by the Food Corporation of India, and damaged foodgrains. The move limits how much these sources can contribute to the 11-billion-litre ethanol tender and leaves producers needing other feedstocks.

Surplus FCI rice is capped at 3.24 billion litres during the first three quarters. In addition, damaged-foodgrain ethanol has an annual ceiling of 1.6 billion litres, with allocations limited to 400 million litres per quarter. FCI rice also cannot exceed nearly 30% of an individual producer’s quarterly offer.

Together, the two sources can provide up to 4.84 billion litres, or about 44% of the tender. The rice ceiling corresponds to 7.2 million tonnes of surplus rice and remains valid until June 30, 2027. The restrictions increase pressure on other feedstocks, especially maize.

Ethanol is a type of alcohol that can be used as a fuel or blended with petrol. In petrol blending, it becomes part of the fuel supplied to vehicles. Blending can reduce reliance on pure petrol and create demand for agricultural feedstocks such as maize, rice and sugarcane products.

The article focuses on the supply side. Oil marketing companies floated an 11-billion-litre tender for ethanol blended fuel. Producers can make ethanol from several materials, including surplus FCI rice, damaged foodgrains, maize and sugarcane-based feedstocks.

The government’s restrictions matter because a fixed amount of ethanol still has to be supplied, but some sources are now limited. Surplus rice and damaged foodgrains together can provide only 4.84 billion litres. The remaining requirement must come from other feedstocks, especially maize and available molasses-based supplies. The article does not detail petrol’s technical blending benefits.

The revised rules limit how much of the ethanol tender can come from surplus FCI rice and damaged foodgrains. This matters because these two sources together can meet less than half of the total requirement, leaving producers to find substantial volumes elsewhere.

The ceiling for surplus FCI rice is 3.24 billion litres over the first three quarters. Damaged foodgrains have a separate annual limit of 1.6 billion litres. Added together, they total 4.84 billion litres, equal to about 44% of the 11-billion-litre tender. The balance must come from other feedstocks.

Maize is expected to carry much of that burden. Industry estimates put maize needed for ethanol at around 16 million tonnes in the 2026-27 supply year, compared with roughly 13 million tonnes in the current year. That is an increase of about 22%, before competing users are counted.

The restrictions do not remove the ethanol requirement. They reduce the amount that can come from surplus FCI rice and damaged foodgrains, while most sugarcane-based routes are also excluded for 2026-27. Producers therefore need more maize to keep supplying the fuel market.

Industry estimates suggest ethanol production could require 16 million tonnes of maize next year, up from about 13 million tonnes currently. At a conversion rate of 380 litres per tonne, that quantity could produce about 6.1 billion litres of ethanol. The grain must also serve poultry feed, dairy feed, starch and other industrial users.

This overlap intensifies competition for available maize. The article reports prices in key mandis at ₹30-31 per kilogram, above the minimum support price of ₹24.1. If ethanol demand rises while supplies remain pressured, competing users may face higher procurement costs and tighter availability.

Sugar-based ethanol had relied heavily on sugarcane juice, sugar syrup and B-heavy molasses. These routes allowed mills to divert part of their cane output, earn from ethanol and help clear cane dues. The article places the government’s change against falling output and wider concern about food availability.

For 2026-27, the government directed oil marketing companies to seek no offers from those three routes. The Department of Food and Public Distribution then told sugar-producing states to ensure they were not used during the supply year. This effectively reduced sugar diversion for ethanol to zero through those channels.

C-heavy molasses was not covered by the restriction. It is left after recoverable sugar has been extracted, and its production is expected to rise when juice and B-heavy molasses are no longer diverted. However, it competes with alcohol and other industries, so only about 500 million litres may go to oil companies.

The article identifies several ethanol feedstocks: maize, surplus FCI rice, damaged foodgrains and C-heavy molasses. It also describes sugarcane juice, sugar syrup and B-heavy molasses, although the government has excluded those routes from procurement for 2026-27.

Each alternative has a constraint. Surplus FCI rice is capped at 3.24 billion litres over three quarters, while damaged foodgrains are limited to 1.6 billion litres annually. C-heavy molasses is expected to increase, but it competes with alcohol and other industries. The article estimates only about 500 million litres from this source may go to oil companies.

Maize can provide a larger replacement supply, but it is already needed for poultry feed, dairy feed, starch and other industrial uses. Industry estimates put ethanol maize demand at 16 million tonnes next year. Therefore, no single alternative can fully replace the restricted rice and sugarcane-based routes without increasing pressure elsewhere.

Maize prices reflect the balance between available supply and total demand. When ethanol producers require more grain, they compete with poultry and dairy feed makers, starch companies and other industrial users. If supply does not grow equally, buyers bid more to secure maize.

The article gives a clear example. Ethanol may need about 16 million tonnes of maize in 2026-27, up from roughly 13 million tonnes this year. At 380 litres of ethanol per tonne, the larger requirement would produce about 6.1 billion litres. This demand is added to existing feed and industrial needs.

Prices are already showing the pressure. Key mandis have reached ₹30-31 per kilogram, compared with a minimum support price of ₹24.1. The article does not report a declining maize harvest. If supply were also lower, the same competing demand would create even stronger upward pressure, but that outcome is not stated.