IGI Logo

CRISIL Ratings in its latest report has said that India’s aim to blend 20 per cent ethanol in petrol by Ethanol Supply Year (ESY) 2025 or around 990 crore litre annually, will require effective utilisation of both grain and sugarcane feedstock to increase its supply. This will also help optimise sugar inventory, particularly considering the high carry-over stock expected at the end of the current season owing to the government restriction on diversion for ethanol production and exports.

As per the report, annual ethanol production from grains is expected to witness a significant increase to approximately 600 crore litre by the next season. This season’s production estimate is around 380 crore litre. The balance will have to be produced by processing ethanol from sugarcane, which is viable given the substantial capacity in place. Blending ethanol helps reduce India’s dependence on crude oil imports. The ethanol blending rate has steadily risen 200-300 basis points each season since ESY 2021. While grain utilisation for producing ethanol is not controlled, the government determines the quantum of sugarcane utilisation based on its estimation of demand-supply balance of sugar for the year ahead.

The report stated that the sugarcane production this year is expected to have been impacted by last year’s erratic rainfall. Consequently, ethanol production from the sugarcane route is expected to be restricted to around 250 crore litre (equivalent of 2.5 million tonne of sugar) this season. In the upcoming season 2025, gross sugar production is expected to be around 33.5 million tonne, with consumption at around 29.5 million tonne. Additionally, sugar inventories are projected to be healthy by the end of this season. Hence, allowing sugarcane - equivalent to the quantity required to produce 4 million tonne of sugar - for ethanol supply (around 390 crore litre) can be considered, while the larger remaining share will be sourced from grain-based route.