India has reversed its previous restrictions and is now permitting sugar mills and distilleries to produce ethanol from sugarcane juice and sugar syrup for the Ethanol Supply Year (ESY) 2024-25. This decision aims to boost ethanol blending in fuel while also ensuring sufficient sugar availability for domestic consumption. The Food Ministry, in coordination with the Ministry of Petroleum and Natural Gas, will periodically review the diversion of sugar for ethanol production relative to the country's sugar production, ensuring year-round sugar availability for domestic use.

In December 2023, the government initially prohibited the use of sugarcane juice and sugar syrup for ethanol production in the 2023-24 ESY (December-November) to maintain adequate sugar supplies for domestic consumption and stabilize prices. The current allowance reverses that decision. Sugar mills and distilleries can now produce ethanol from sugarcane juice, sugar syrup, B-Heavy molasses, and C-Heavy molasses, according to agreements and allocations with oil marketing companies (OMCs).

The government is aiming for 20% ethanol blending in gasoline by 2025-26 to reduce reliance on crude oil imports. By July of the current season, ethanol blending in India had reached 13.3%, an increase from 12.6% in the 2022-23 season. As of November 30, 2023, India's ethanol production capacity was approximately 13.80 billion litres. Of the total ethanol used for gasoline blending, approximately 61% comes from B-heavy molasses, 20% from sugar syrup, 11% from surplus rice, 6% from damaged food grains and maize, and 2% from C-heavy molasses.

To meet the 20% blending target by 2025, India will require approximately 10.16 billion litres of ethanol, with a total ethanol demand of 13.50 billion litres including other uses. Achieving this goal will require an estimated ethanol production capacity of around 17.00 billion litres by 2025, assuming plants operate at 80% efficiency.

In a related move, the government has also permitted ethanol distilleries to participate in Food Corporation of India (FCI) rice auctions, allowing them to purchase rice at a fixed price through e-auctions from August to October 2024 for ethanol production. Distilleries can procure a maximum of 2.3 million tonnes of rice from FCI stocks for this purpose. Supplies of excess rice to distilleries had been suspended in July 2023 due to concerns about food availability and rising prices.