Ethanol Allocation: Distilleries Face Uncertainty

New Delhi, Oct 23 (PTI) More than 350 operational distilleries across the country are facing an uncertain future due to inadequate procurement orders under the latest ethanol tender, with industry bodies flagging concerns over the allocation methodology that favours new entrants over existing units.

The Ethanol Supply Year (ESY) 2025-26 tender issued by Oil Marketing Companies (OMCs) has come under fire from stakeholders who allege that the allocation criteria is creating artificial imbalances, while sidelining distilleries set up under prior government commitments.

According to the tender document (#1000442332), zones where offers from local distilleries fall short of requirements are classified as deficit zones, with all local offers considered full for allocation.

However, industry representatives say this approach ignores surplus capacity in neighbouring states, much of which was established under Long-Term Offtake Agreements (LTOA) and Expression of Interest initiatives promoted by OMCs themselves.

"A more holistic procurement model is needed -- one that considers surplus availability across states, pre-existing capacities and investments, prior understandings and commitments made with distilleries," Grain Ethanol Manufacturers Association (GEMA) President C K Jain said in a statement.

The current allocation mechanism is not only economically inefficient but also environmentally counterintuitive as it promotes the creation of redundant capacity while neglecting existing infrastructure, he added.

Industry stakeholders claim that many of the affected distilleries invested heavily based on government commitments under the Ethanol Blended Petrol (EBP) programme, which aims to reduce fossil fuel imports and support farmers through sugarcane and grain procurement.

The ethanol blending programme is a key initiative under the government's push for energy security and has made significant progress in recent years toward the target of 20 per cent ethanol blending in petrol.

However, experts warn that without equitable demand distribution, the long-term sustainability of India's ethanol ecosystem could be at risk.

The published allocations indicate that at least 350 distilleries have been deprived of adequate orders, raising questions about the fairness of the procurement process.

Industry bodies are now calling for urgent policy intervention to ensure that existing operational capacity is utilized optimally before encouraging new investments in deficit zones.

The original goals of the ethanol programme included addressing regional deficits through localized production, reducing transport costs, and supporting farmers, but the current implementation appears to be creating market distortions, stakeholders said.