Indian Food Ministry asks States to ensure no sugar is diverted for ethanol

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Diversion may not be allowed the entire supply year even as the Centre extends duty-free imports of raw sugar until December 31,

By BL New Delhi Bureau

Updated - October 22, 2026 at 09:40 PM. | New Delhi

Close up a sugar cubes on wooden spoon on the table | Photo Credit: towfiqu ahamed

Soon after oil marketing companies announced they would not purchase ethanol made from sugarcane juice/syrup or B-Heavy Molasses (BHM), the Food Ministry on Thursday wrote to all the sugar mills informing about a ban on the biofuel production from these two sugar-based feed stocks.

In a letter, the Ministry h said that diversion of sugar to ethanol is not permitted in ensuing Ethanol Supply Year (ESY) 2026-27 (November 2026 to October 2027). “Accordingly, Sugar Mills/Distilleries are not allowed to produce ethanol from sugarcane juice and B-heavy molasses in the ensuing ESY 2026-27,” it said in a brief letter.

In a separate letter, the Ministry informed secretaries of excise department in all the sugar producing States about the ban.

“As per the decision of the Government of India, diversion of sugar for ethanol production shall not be permitted during the ensuing Ethanol Supply Year (ESY) 2026-27,” it said.

Plea to States

Further, the Ministry requested the States’ officials to issue necessary instructions to all concerned in their respective State to ensure strict compliance with the decision. “The State Excise Department may also take necessary measures to monitor compliance and ensure that no ethanol is produced from sugarcane juice and B-heavy molasses during ESY 2026-27, it said.

The government has been taking several steps as India faced a sugar shortage in 2025-26 sugar season (October-September) and is likely to have a similar situation in 2026-27 as well. While abruptly banning export after permitting 15 lakh tonnes (lt) in last season, the government o allowed duty-free import of 10 lt raw sugar in August. However, permits were issued for about 8 lt.

The Directorate General of foreign Trade (DGFT) has now extended the validity of import permits till December 31, 2026, as those were supposed to expire on October 31.

Quota surrender

“The timeline specified in the existing import policy condition for import of raw sugar under the TRQ is hereby extended up to 31.12.2026. All other conditions specified in the Notification No. 31/2025-26 dated 20.08.2026 shall remain unchanged,” the DGFT said in the notification.

Industry sources said that while no import taken has place due to price parity issue after dip in Indian sugar prices in the domestic market, 3-4 lt of sugar quota has been surrendered by the traders, which could not be officially confirmed.

As many as 70 sugar mills in Maharashtra have started crushing operation despite lower recovery and about 1.25 lt of sugar has been produced in the current season. The government has allowed mills the freedom to sell that sugar produced any time during October-November without seeking its permission and that quantity will also be in addition to the monthly quota.

However, traders said that mills are selling sugar this month from the unsold stock of last season that ended September 30 and the November quota allocation will have to factor in the quantity produced in October as there was very low closing stock of 32-35 lt on September 30, 2026. There will be a challenge also to meet next month demand as there is delay in starting crushing operation in Uttar Pradesh. The government has been persuading mills to start the operation, but due to fear of very low recovery – below 7 per cent – factories do not want to take financial hit, sources said.

Published on October 22, 2026

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