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Sugarcane diversion to ethanol
What it is
Mills divert cane juice, syrup or B-heavy molasses to ethanol instead of crystallising sugar. Around 34 lakh tonnes of sugar equivalent was diverted in 2025-26, against net production of ~309.5 lakh tonnes
Ethanol procurement is contracted with oil marketing companies at administered prices
Impact on industries
- Gives mills a second revenue stream insulated from global sugar price crashes, with assured OMC offtake and better payment discipline
- Diversion reduces the sugar surplus, supporting domestic prices without requiring exports or government intervention
- Distillery capacity is underutilised - the sugar sector received only ~27.5% of ethanol allocation against a roadmap contemplating ~55%
- Ethanol economics depend on administered procurement prices, so the hedge against sugar policy is itself a policy exposure
- Bagasse co-generation adds a third stream, making a modern mill a sugar, fuel and power business