A looming supply crunch for maize has emerged as ethanol producers and key industrial users, including the poultry and dairy sectors, prepare for an intensified contest for grain in the upcoming ethanol supply year, which spans November 2026 to October 2027. This development follows a pivotal directive from the central government on October 16, which banned oil marketing companies (OMCs) from procuring ethanol derived from sugarcane juice, sugar syrup, and B-heavy molasses. The policy shift, implemented to safeguard domestic sugar availability, has effectively removed these traditional sugar-based sources from the fuel production pipeline.
The impact of this decision is significant, as the burden of meeting national fuel demand now shifts heavily toward grain-based alternatives. A tender issued by Bharat Petroleum Corp. Ltd (BPCL) on October 16 seeks bids for approximately 11 billion litres of ethanol for the 2026-2027 supply year, highlighting the massive scale of the requirement. While C-heavy molasses—a by-product remaining after sugar extraction—remains an eligible feedstock for ethanol production, experts suggest it will be insufficient to bridge the supply gap created by the restriction on more sugar-rich alternatives.
The pivot toward maize presents a complex challenge for the market. Agricultural demand for maize is already high, driven by poultry-feed manufacturers, starch makers, and other industrial users. This existing demand, coupled with concerns over the impact of poor rainfall on crop yields, has already exerted upward pressure on maize prices. Consequently, the rising cost of this critical grain has contributed to increased prices for essential consumer goods like eggs and milk. Industry observers fear that as ethanol distilleries ramp up their procurement, the resulting supply tightness could further exacerbate these inflationary pressures.
Industry estimates project that ethanol production may require roughly 16 million tonnes of maize during the next supply year. This figure represents an increase of approximately 22% over the estimated 13 million tonnes utilized during the current supply year. While other grains could theoretically supplement this volume, their utility remains constrained by policy caps. The government has restricted the use of surplus rice held by the Food Corporation of India to 7.2 million tonnes. Based on an assumed conversion rate of 450 litres of ethanol per tonne of rice, this would generate about 3.25 billion litres of fuel, leaving a significant portion of the 11-billion-litre tender unfulfilled.
To close the remaining gap, the industry is looking toward damaged foodgrains and increased output from C-heavy molasses. Agricultural markets expert GK Sood noted that production from damaged foodgrains could potentially rise from 700 million litres in the current cycle to a maximum of 1.25 billion litres in 2026-27, depending on total availability. Regarding molasses, Sood explained that while the prohibition on diverting cane juice and B-heavy molasses will lead to an uptick in C-heavy molasses production, the resulting increase in ethanol yield is unlikely to exceed 400 million litres. Even with these combined efforts, industry analysis suggests that a substantial deficit will remain against the total tender requirement, setting the stage for a difficult year for grain-dependent industries.
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