State oil firms to stop buying ethanol made from cane juice, sugar and B-heavy molasses from Nov 1

State-run oil marketing companies will not buy ethanol made from sugarcane juice, sugar, sugar syrup and B-heavy molasses from November 1. The government's decision has caused a stir in the sugar industry. There is considerable resentment over ethanol across the country, and it is said that ethanol is causing several problems in vehicles.

The order will apply from the new supply year in India, which begins on November 1. It is said this could help keep sugar prices in check in the market. Poor rain this year has hit sugarcane yields, leading to a sizeable rise in sugar prices.

Indian Oil Corporation, Bharat Petroleum Corporation, Hindustan Petroleum Corporation, Numaligarh Refinery Limited and Mangalore Refinery and Petrochemicals Limited have issued a joint tender to buy about 11 billion litres of ethanol for the new supply year. Citing the latest government guidelines, the new tender documents state clearly that no bid will be accepted for ethanol made directly from sugarcane juice, sugar syrup or B-heavy molasses. This is being read to mean that most of the cane reaching mills will now be used only to make sugar.

India is the world's second-largest sugar producer after Brazil. Even so, sugar prices in the country have risen sharply, and the burden has fallen directly on ordinary people. The monsoon rain was also highly erratic this year. A strong El Nino created drought-like conditions in the major cane-growing states, which seriously affected cane yields and prices. With fears of a lower harvest, the government's move to keep domestic sugar prices in check is seen as significant.

The curbs on making ethanol from sugarcane will not affect India's plan to blend 20% ethanol in petrol. The oil companies have kept other routes open for ethanol supply. Under the new tender, suppliers will be able to make ethanol from C-heavy molasses, surplus rice held by the Food Corporation of India (FCI), damaged grain, maize and other agricultural residues approved under the National Policy on Biofuels.