India's Sugar Mills Suffer Under Ethanol Policy

The ethanol policy in India has led to a crisis for sugar mills in Maharashtra. The policy was introduced in 2018 and encouraged sugar mills to expand their distilleries to produce ethanol, which would be used as a biofuel blend with petrol. However, the reality is that ethanol production has become a liability for these mills.

When the policy was introduced, 119 of Maharashtra's 210 sugar mills expanded their distillery capacity for ethanol production. By 2026, the State's installed ethanol production capacity stood at 323 crore litres, but independent industry estimates put it even higher, at 396-424 crore litres. However, the Oil Marketing Companies (OMCs) bought only 26-27% of the country's ethanol from sugar mills by 2026, and a larger quota was allotted to grain-based ethanol.

This has left sugar mills with idle capacity, earning them no revenue even as maintenance costs climb each year. The Maharashtra government has assured mill owners that it would take up the issue with the Union government, but nothing has changed since then. An industry spokesperson expressed fear that the Centre may cut the quota further, which would deepen the crisis for sugar mills.

The sector is now fighting on two fronts: a financial crisis from the ethanol policy mess and a battle of perception, as the middle class believes sugar mills have grown richer from ethanol blending. Former Delhi Chief Minister Arvind Kejriwal recently led a town hall against the ethanol policy, which has gathered pace.