Despite the government’s strong push for ethanol blending and energy self-reliance, a growing concern is emerging within the industry. The latest Ethanol Supply Year (ESY) 2025–26 tender has sparked widespread discontent, with stakeholders warning that the allocation methodology unfairly benefits new entrants in deficit zones, while marginalizing existing operational units that have significant surplus capacity.
Deficit Zones Prioritized, Surplus Regions Overlooked
The tender’s ‘Allocation Methodology & Criteria’ states that authorities consider zones where distillery offers fall short of local requirements as deficit zones and fully allocate vendors’ offers in these areas.
While this policy aims to encourage local sourcing in deficit regions, it effectively penalizes surplus-producing states, leaving distilleries—many established under Long-Term Offtake Agreements (LTOA) or Expression of Interest (EOI-1) schemes—without sufficient orders. Notably, the policy also ignores distilleries set up independently, without formal agreements with Oil Marketing Companies (OMCs).
Over 350 Operational Units Deprived of Orders
OMCs have denied over 350 distilleries adequate procurement orders, including units previously encouraged and supported under government policies. Despite having ready capacity, many facilities now operate below potential or lie idle, facing financial strain as authorities favor newer capacities in so-called deficit zones.
The development has caused deep frustration among ethanol producers, many of whom invested heavily in infrastructure and supply chains based on assurances of steady government demand under the Ethanol Blended Petrol (EBP) program.
Policy Deviations Undermining Original Goals
The government initially designed the ethanol blending initiative to reduce regional imbalances, cut transport costs, and support farmers through sustained sugarcane and grain procurement. However, the current allocation strategy appears to be distorting this vision. Instead of achieving balanced growth, the approach is creating artificial surpluses in certain states and triggering a rush of new capacity in others, thereby weakening the core objectives of efficiency, sustainability, and equitable distribution.
Industry Calls for Policy Correction
Stakeholders across the ethanol sector are now urging the government to review the allocation model. They argue that the present method is economically inefficient and environmentally counterproductive, as it promotes unnecessary capacity expansion while leaving existing infrastructure underutilized.
Dr. C. K. Jain, President of Grain Ethanol Manufacturer’s Association (GEMA), emphasized, “A more holistic procurement model is needed—one that considers surplus availability across states, pre-existing capacities and investments, and the commitments already made with distilleries.” He added that the current system ignores the spirit of prior policy commitments and risks destabilizing an otherwise successful ethanol supply chain.
The Road Ahead: Need for Equitable Allocation
India’s ethanol blending program has achieved remarkable progress over the past decade, but its long-term success will depend on fair, transparent, and efficient allocation of procurement orders. If operational distilleries with surplus capacity continue to be overlooked while new projects are encouraged in deficit zones, the result will be market distortions, stranded investments, and inefficiencies across the ethanol ecosystem. As per the press release, to ensure balanced growth and optimal resource utilization, OMCs and policymakers must revisit the allocation criteria and align future tenders with the broader goals of sustainability, regional balance, and industry stability.
