From Export Strength to Ethanol Supremacy: The Dual Growth Engine of India’s Sugar Sector
The industry is moving towards Sustainable Aviation Fuel (SAF), with pilot projects already in progress at top refineries. As the global aviation industry works towards rapid decarbonisation, the Indian sugar sector is set to be a vital supplier of green fuel for aviation.
March 13, 2026. By News Bureau
Broadening the Scope of Ethanol Blending
The primary catalyst for this transformation in the industry is the Ethanol Blended Petrol (EBP) Programme. The government's initiative to hasten the target of 20 percent ethanol blending in petrol to the 2025-26 Ethanol Supply Year (ESY) has turned sugar mills into contemporary green energy hubs. To achieve this objective, the overall ethanol demand is projected to be 1350 crore litres, which requires a distillation capacity of around 1700 crore litres. This ecosystem’s robustness is particularly due to the use of a variety of feedstocks. Sugarcane continues to be the main feedstock, but including food grains such as maize and damaged rice makes it possible to maintain a steady supply, even in years when sugarcane yields vary. Furthermore, the earlier increase in procurement prices for ethanol derived from B-heavy molasses and juice has encouraged mills to redirect surplus sugar away from a crowded market. This shift is leading to quicker cash flows and enhancing the financial stability of sugar cooperatives across the nation. But next positive revision of Ethanol prices from sugar cane/ intermediate product is desperately awaited specially after increase of recent hike in SAP of cane in UP State.
India as a Key Global Supplier
In addition to its domestic energy reforms, India has bolstered its role as a crucial participant in the global sugar market. It has emerged as a strategic "swing supplier," stepping in to address global supply shortages when international prices are advantageous, ranking just behind Brazil in terms of production volume. India's strategic geographical position offers a considerable logistical advantage; its proximity to major importing regions in Asia, Africa, and the Middle East leads to reduced shipping expenses and significantly faster delivery times compared to South American competitors. For 2025-26 marketing year, the government has fixed an initial export quota of 15 Lakh tonnes, The strategic approach keeps the domestic prices stable, providing the mills with an opportunity to capture demand from overseas from key destinations such as the UAE, Somalia, and Sudan.
The Biorefinery and Circular Economy Approach
The modern Indian sugar sector is characterised by a shift toward an integrated biorefinery model that aims to maximise the utility of every byproduct. Bagasse, the fibrous leftover from crushing, is utilised in high-pressure boilers for cogeneration. Currently, this process produces about 4700 MW of power, with the ability to export 3500 MW to the national grid. At the same time, press mud—previously seen as a low-value byproduct of the juice clarification process—is now being converted into Compressed Biogas (CBG) through the Sustainable Alternative Towards Affordable Transportation (SATAT) initiative. Biogas plants offer a renewable transport fuel that reduces greenhouse gas emissions while producing fermented organic manure, which supports regenerative agriculture and improves soil health in rural areas. To bolster this market, the government has introduced a Compressed Biogas Obligation starting at 1 percent for the 2025-26 period to guarantee a stable market for this environmentally friendly product.
Empowering Communities and Assisting Farmers
The development of the sugar industry primarily aims to empower rural communities. The Fair and Remunerative Price (FRP) set by the central government safeguards farmers against market volatility. For the 2025-26 season, it is established at 355 rupees per quintal. This reflects a significant 105 percent return on production expenses. Expanding into ethanol has greatly enhanced arrears management for farmers. The government has taken several measures. They diverted excess sugar to ethanol. They also provided financial aid for exports. As a result, sugar mills have seen a significant boost in liquidity. This has allowed them to clear over 99 percent of cane dues for the seasons up to 2020-21. For the 2021-22 season, the clearance rate was 97.40 percent Furthermore, the growth of ethanol and biogas infrastructure significantly promotes rural industrialisation, with ethanol production projected to create 290 direct jobs and 1280 indirect jobs for every crore litre of capacity established.
Encouraging Environmental and Strategic Security
Environmental responsibility and national security are closely linked within this dual-growth framework. Between 2014 and 2025, the ethanol blending initiative has successfully saved more than 144000 crore rupees in foreign exchange by substituting imports, resulting in a decrease of about 244 lakh metric tonnes in crude oil imports. Additionally, this program has contributed to a reduction of roughly 736 lakh metric tonnes of carbon dioxide emissions, which is comparable to the environmental benefit of planting 30 crore trees. Launched in 2023, during India’s G20 Presidency, the Global Biofuels Alliance (GBA) further cements India's position at the forefront of the global energy transition. This partnership fosters international cooperation and technology exchange in order to secure more international investment in the industry.
Finding Our Way to 2030 and Beyond
The sector is currently planning for a 27 percent blend but current pace is bit slow which is making industry apprehensive. This ambitious journey will require a greater adoption of Flexible Fuel Vehicles (FFVs) and a significant upgrade of the infrastructure necessary to dispense 100 percent ethanol Moreover, the industry is moving towards Sustainable Aviation Fuel (SAF), with pilot projects already in progress at top refineries. As the global aviation industry works towards rapid decarbonisation, the Indian sugar sector is set to be a vital supplier of green fuel for aviation. The transition from a struggling industry to a cutting-edge biorefinery system represents a significant milestone, showcasing the essence of a self-sufficient India and promoting sustainable economic growth for the future.
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