The Centre’s decision to cap ethanol production from surplus Food Corporation of India (FCI) rice and damaged foodgrains, after excluding most sugarcane-based feedstocks from procurement, is likely to push more demand towards maize in the 2026-27 supply year, intensifying competition with poultry, dairy and starch industries for the grain.
“DFG is used as food besides feed. If offers exceed this limit, OMCs will proportionately reduce the eligible quantities of all bidders. “FCI rice is subject to two boundaries. The ethanol programme, when started, had relied heavily on sugarcane-based feedstocks, particularly sugarcane juice, sugar syrup and B-heavy molasses. These routes allowed sugar mills to divert part of their sugarcane output towards ethanol, providing an additional revenue stream and helping them clear cane dues. The Department of Food and Public Distribution subsequently directed sugar-producing states to ensure these routes were not used during the supply year.
Under revised tender conditions issued on November 3, the government has capped ethanol made from surplus FCI rice at 3.24 billion litres over the first three quarters and imposed a separate annual ceiling of 1.6 billion litres on ethanol from damaged foodgrains. Together, the two sources can account for a maximum of 4.84 billion litres, or about 44% of the 11 billion-litre ethanol tender floated by oil marketing companies (OMCs) for supplying blended fuel. The revised tender also restricts ethanol made from surplus FCI rice to nearly 30% of an individual producer’s total quarterly offer. Aggregate allocation from this source cannot exceed 1.08 billion litres in each of the first three quarters. Not over 30% of the total ethanol offered by a unit can be such ethanol, and the allocation is limited to 1.08 billion litres a quarter for three quarters,” Sood said. The three-quarter ceiling of 3.24 billion litres corresponds to 7.2 million tonnes of surplus rice allocated by the government for the Ethanol Blended Petrol (EBP) programme. The allocation is valid until June 30, 2027, according to the revised tender. The restrictions come against the backdrop of the government’s decision to stop diversion of sugar for ethanol production in 2026-27 supply year, which runs from November 2026 to October 2027. But as output fell, the government on October 16 this year, through BPCL , on behalf of OMCs, issued the next procurement tender with directions to reduce sugar diversion for ethanol to zero. No offers were sought for ethanol produced from sugarcane juice, sugar, sugar syrup or B-heavy molasses for ESY 2026-27.
This is the first sign of concern over food availability,” said GK Sood, an agricultural markets expert and independent director of a listed company.
