Crisis of Demand-Supply Imbalance in the Ethanol Manufacturing Industry

New Delhi. Driven by government assurances and incentives, India's ethanol manufacturing industry has expanded rapidly over the past few years, leading to a significant increase in production capacity; however, the demand and consumption of ethanol have not kept pace with this growth. Consequently, distilleries are unable to utilize their full accumulated production capacity.

The widening gap between ethanol demand and supply is compounding difficulties for manufacturers. While the situation for grain-based distilleries remains somewhat satisfactory, the condition of sugar mills and distilleries utilizing sugarcane-based feedstocks is deteriorating.

These distilleries may also face a severe shortage of raw materials this year (2026-27); given the weak sugarcane harvest and the need to boost sugar production, the government is considering restricting the use of sugarcane juice, syrup, and B-heavy molasses for ethanol production.

The government will need to exercise great caution regarding any decision to increase the ethanol blending level in petrol, as the issue has sparked some controversy. Faced with high sugar prices and critically low stock levels, the government is unlikely to take any additional risks.