Ethanol push turns sour as tender skews market balance

New Delhi: More than 350 operational distilleries across the country are facing an uncertain future due to in-adequate procurement orders under the latest ethanol tender, with industry bodies flagging con-cerns over the allocation methodology that favours new entrants over existing units.

The Ethanol Supply Year (ESY) 2025-26 tender issued by Oil Marketing Companies (OMCs) has come under fire from stakeholders who allege that the allocation criteria is creating artificial im-balances, while sidelining distilleries set up under prior government commitments.

According to the tender document (#1000442332), zones where offers from local distilleries fall short of requirements are classified as deficit zones, with all local offers considered full for allo-cation. However, industry representatives say this approach ignores surplus capacity in neigh-bouring states, much of which was established under Long-Term Offtake Agreements (LTOA) and Expression of Interest initiatives promoted by OMCs themselves.

“A more holistic procurement model is needed -- one that considers surplus availability across states, pre-existing capacities and investments, prior understandings and commitments made with distilleries,” Grain Ethanol Manufacturers Association (GEMA) President CK Jain said in a statement.

The current allocation mechanism is not only economically inefficient but also environmentally counterintuitive as it promotes the creation of redundant capacity while neglecting existing infra-structure, he added. Industry stakeholders claim that many of the affected distilleries invested heavily based on government commitments under the Ethanol Blended Petrol (EBP) programme, which aims to reduce fossil fuel imports and support farmers through sugarcane and grain pro-curement. The ethanol blending programme is a key initiative under the government’s push for energy security and has made significant progress in recent years toward the target of 20 per cent ethanol blending in petrol.

However, experts warn that without equitable demand distribution, the long-term sustainability of India’s ethanol ecosystem could be at risk.