Government directs sugar mills to curb Ethanol production to ensure adequate sugar supplies

The Department of Food & Public Distribution (DFPD) utilizes its authority under the Essential Commodities Act of 1955 to oversee the production, sale, and stock levels of essential commodities, including sugar, in India. With the goal of maintaining a consistent and stable sugar supply for domestic consumption, the DFPD exercises control through the implementation of the Sugar (Control) Order of 1966, asserting authority over key facets of the sugar industry.

Recently, in a move invoking clauses 4 and 5 of the Sugar (Control) Order 1966, the government directed all sugar mills and distilleries to refrain from using sugar cane juice/sugar syrup for ethanol production during the Ethanol Supply Year (ESY) 2023-24. This directive, effective immediately, aims to manage the utilization of sugarcane resources for ethanol production, focusing on sustaining sugar availability in the local market. It is essential to note that the supply of ethanol derived from existing offers received by Oil Marketing Companies (OMCs) from B-Heavy molasses will continue unaffected by this directive.


The decision to restrict the diversion of sugar for ethanol production has triggered notable repercussions in the stock market, particularly impacting sugar-related stocks. In Thursday’s trading session, sugar stocks experienced a decline of up to 7 percent. Uttam Sugar Mills Ltd bore the brunt of this development, witnessing a sharp drop of 7.27 percent to Rs 413.20, making it the worst-hit sugar stock. Other prominent sugar stocks, including Dalmia Bharat Sugar and Industries Ltd, Balrampur Chini Mills Ltd, Dwarikesh Sugar Industries Ltd, Triveni Engineering, Shree Renuka Sugars, Dhampur Sugar Mills Ltd, and Bajaj Hindusthan, also saw negative trends in their share prices.

The government’s aim, as per reports, is to bolster sugar production in light of potential challenges arising from below-normal rainfall in key sugarcane-growing states. The reported plan involves advising sugar mills against using sugar cane juice and B-heavy molasses— a byproduct known for its higher sucrose levels— for ethanol production.

While the government sources cited in Reuters suggest that this decision is driven by the need to prioritize sugar production this year, another report from Times NOW, quoting sources, contradicts the notion of a proposal under consideration to cut ethanol production. According to these sources, the government remains committed to achieving a 20 percent ethanol blending target by 2025. This conflicting information raises questions about the government’s long-term strategy in balancing ethanol production for fuel purposes and ensuring an ample supply of sugar for domestic consumption.