The volume of ethanol allocated to be produced from damaged foodgrains has more than tripled for the 2026-27 supply year, while the corresponding allocation for maize has risen 8%, according to feedstock-wise allocation data released by oil marketing companies (OMCs).
However, these allocations do not represent assured quantities of grain that will be supplied to distilleries. Actual procurement will depend on prices and competition from other industries that use these feedstocks.
According to the data, the allocation for damaged foodgrains has risen to 3.81 million tonnes from 1.13 million tonnes in the previous supply year, an increase of 237%. The corresponding allocation for maize has increased to 13.64 million tonnes from 12.6 million tonnes, while that for surplus foodgrains has risen to 7.2 million tonnes from 5.18 million tonnes.
The government has allocated 7.2 million tonnes of surplus Food Corporation of India (FCI) rice for the ethanol blending programme until June 30, 2027. This quantity is expected to yield around 3.24 billion litres of ethanol, with OMCs capping procurement from this source at 1.08 billion litres in each of the first three quarters of the supply year.
Industry estimates, however, suggest that the allocations could rise further. “Since gasoline consumption is rising by close to 7% per annum, the requirement of ethanol for E20 by OMCs in the public sector will also rise...There will be more allocations (for ethanol) after this first allocation. Rice is allocated as per FCI year, which ends on 30th June. The government might allocate FCI rice for June to Oct as well later on,” a senior industry official said, requesting anonymity.
{{/usCountry}}Industry estimates, however, suggest that the allocations could rise further. “Since gasoline consumption is rising by close to 7% per annum, the requirement of ethanol for E20 by OMCs in the public sector will also rise...There will be more allocations (for ethanol) after this first allocation. Rice is allocated as per FCI year, which ends on 30th June. The government might allocate FCI rice for June to Oct as well later on,” a senior industry official said, requesting anonymity.
{{/usCountry}}The OMC data shows allocations of 3.239 billion litres of ethanol from surplus rice, 1.599 billion litres from damaged foodgrains, 5.183 billion litres from maize and 971 million litres from C-heavy molasses. Together, these account for around 11 billion litres. An additional allocation is likely towards the end of the supply year, as the industry estimates that around 12 billion litres will be required to maintain a 20% ethanol blend in petrol.
However, the actual availability of maize and damaged foodgrains for distilleries will depend on the prices offered by competing industries. Both have alternative uses, particularly in animal feed, food processing and starch manufacturing. Suppliers are likely to sell to whichever buyer offers a better price, rather than necessarily honouring the quantities indicated by ethanol allocations. The same applies to C-heavy molasses, which also has competing uses.
The changes in the feedstock mix follow the Centre’s directive to OMCs to reduce sugar diversion for ethanol production to zero in the 2026-27 supply year, with the exception of sugarcane juice, sugar syrup and B-heavy molasses, from November 1, 2026, to October 31, 2027.
The decision was taken amid concerns over domestic sugar availability, rising prices and the possibility of lower sugarcane output following poor rainfall in key producing states, including Maharashtra and Karnataka. C-heavy molasses, a by-product left after recoverable sugar has been extracted, remains eligible for ethanol production.
With the three sugar-based routes excluded, OMCs have had to rely more heavily on alternative feedstocks, including maize, damaged foodgrains and surplus FCI rice, to meet their 11-billion-litre procurement requirement.
Ethanol producers had offered 19.32 billion litres against the OMCs’ requirement of 11 billion litres for 2026-27. Maize-based ethanol accounted for 11.45 billion litres, or nearly 60%, of the total offers.
The shift towards alternative feedstocks comes at a time when maize production is also expected to decline. Industry estimates suggest that the crop could be 15-20% lower this year following a fall in acreage and yields in key producing states.
This could intensify competition between ethanol manufacturers and traditional users of maize, including poultry feed, dairy, starch and food-processing industries. Industry participants have attributed the expected decline to weaker prices in the previous season, which discouraged farmers from planting, and unfavourable weather conditions.