India has achieved the target of 20 percent ethanol blending (E20) in petrol ahead of schedule, and now the government is preparing to move from E22 to E30. This policy has increased the demand for sugarcane, but has its direct benefit reached the farmers’ earnings? Let us understand.
Foreign exchange worth Rs 1.4 lakh crore saved
The government says that due to this scheme, foreign exchange of more than Rs 1.4 lakh crore has been saved so far and a target has been set to blend 1500 crore liters of ethanol into petrol this year. This is expected to further reduce the country’s dependence on crude oil imports. The direct impact of this entire policy is also being seen on sugarcane based ethanol production, revenue model of sugar mills and income structure of farmers, due to which a new economic and agricultural model now seems to be emerging. This entire process has affected the procurement, price and supply chain of sugarcane, the impact of which is reaching the farmers. But the question is whether this has increased the earnings of farmers?
How is ethanol made from sugarcane?
First of all let us understand how ethanol is made from sugarcane. In the process of making ethanol from sugarcane, firstly the sugarcane is cut from the fields and brought to the sugar mills, where it is crushed and juice is extracted. After cleaning and filtering this juice, yeast is added to it, due to which the process of fermentation starts. During this, the sugar present in the sugarcane juice gets broken down and converted into alcohol i.e. ethanol and carbon dioxide is separated. After this, by heating this mixture, pure ethanol is extracted through distillation process. Then it is further purified and made fuel-grade, which is finally mixed with petrol to prepare fuels like E20.
How many sugar mills are producing ethanol in India?
According to the Ministry of Consumer Affairs, Food and Public Distribution, there are currently more than 500 sugar mills actively working in India. More than 250 of these mills and their associated distilleries have been upgraded for ethanol production. Now more than 200 sugar mills in India have their own distilleries, where ethanol is being produced. To meet the government target of mixing ethanol in petrol, these mills are making ethanol directly using sugarcane juice and B-heavy molasses.
More than 53 sugar mills in Uttar Pradesh, the country’s largest sugarcane producing state, have now become involved in ethanol production. Apart from this, a large number of mills in states like Maharashtra, Karnataka and Andhra Pradesh are also active in this work.
How much are farmers getting paid?
According to the data of PIB (Press Information Bureau) and Petroleum Ministry, Rs 1.25 lakh crore to Rs 1.58 lakh crore has been paid to farmers under the Ethanol Blending Program from the ethanol supply year 2014-15 to June 2026. The government says that after achieving the E20 target, this model has become stronger and more than Rs 35,000 crore is being paid to farmers every year through oil marketing companies (OMCs). With this system, sugarcane farmers are now getting cash flow faster than before, which has increased the availability of cash in the rural economy. The financial condition of sugar mills has also strengthened as they are getting regular revenue from ethanol sales.
Sugarcane price (FRP) and government rate of ethanol
According to PIB, the government has increased the fair and remunerative price (FRP) to Rs 355 per quintal for the 2025-26 sugarcane season. About 5 crore sugarcane farmers of the country are getting direct benefits from this. Ethanol procurement rates have also been fixed by the government so that mills can get stable income and payments to farmers are not disrupted. In this, Rs 57.97 per liter is paid from C-heavy molasses, Rs 60.73 per liter from B-heavy molasses and Rs 65.61 per liter from sugarcane juice. According to the Department of Food and Public Distribution (DFPD), due to this system, sugar mills have paid 99.7% to 99.9% of the sugarcane dues on time in the previous seasons, which can be considered a big improvement compared to earlier years.
Demand from sugarcane farmers has increased due to increase in ethanol blending.
What are C-heavy, B-heavy and juice/syrup?
- When sugar is mixed into ethanol from sugarcane (alcohol that is mixed with petrol), they use different things. To promote these mills, the government purchases ethanol from them at different rates:
- Sugarcane Juice/Syrup (₹65.61 per litre): If the mill makes ethanol directly from pure sugarcane juice instead of making sugar, then the government gives it the highest rate of ₹65.61 per litre.
- B-Heavy Molasses (₹60.73 per litre): When some sugar is extracted from sugarcane juice, a thick heavy liquid (molasses) is left. The mill gets ₹ 60.73 per liter for making ethanol from this.
- C-Heavy Molasses (₹ 57.97 per litre): When all the sugar is extracted from the sugarcane and the residual waste like molasses is left, then the lowest price i.e. ₹ 57.97 per liter is available for making ethanol from it.
Which states benefit the most?
According to data from the Indian Sugar Mills Association (ISMA) and the Agriculture Ministry, the biggest impact of ethanol blending is being seen in sugarcane producing states like Uttar Pradesh, Maharashtra and Karnataka. A large number of mills in Uttar Pradesh have increased ethanol production capacity, due to which farmers are now getting payment within an average of 21 days. This change is being seen most in western UP and Terai areas.
Cooperative and private mills in Kolhapur, Solapur and Pune belts of Maharashtra have undertaken ethanol diversion on a large scale, which has improved the working capital position of the mills. Even in Karnataka, due to expansion of ethanol capacity, farmers are getting payments on time and directly into their bank accounts, which has led to stability in rural income.
excise duty abolished
The Central Government has completely abolished the excise duty on ethanol blended petrol (E22, E25, E27 and E30) ranging from 22 to 30 percent. Along with this, the government has also changed the duty imposed on oil export. Export duty on diesel and aviation turbine fuel was reduced, while on petrol it was increased from Rs 1.5 to Rs 4 per litre. However, there was no change in the excise duty of petrol and diesel sold in the domestic market, hence it will not have any impact on the common consumers.
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