# Bioethanol and Sugar Sugar and ethanol are made from the same cane, so mills in Brazil and India choose how much sucrose to turn into each. In India the choice is regulated: diverting about 3.5 Mt of sugar a year into ethanol supports E20 but is cut back when sugar supply looks tight. Source page: https://www.materialinsights.org/links/bioethanol-and-sugar/ [Bioethanol](https://www.materialinsights.org/energy/bioethanol/) (chemical) and [Sugar](https://www.materialinsights.org/commodities/sugar/) (commodity): 4 relationships. ## How they are linked ### 1. Feedstock: cane juice and molasses *Physical flow · Strong · Sugar cane to bioethanol* Ethanol can be fermented directly from cane juice or syrup, or from molasses left after sugar is crystallised; B-heavy molasses keeps more sugar in it than final C-heavy molasses, so it yields more ethanol. - **316 of 1,003 crore L** ethanol supplied in India from sugar feedstocks, ESY 2024-25 - **15.82%** cane juice share of the first ESY 2025-26 allocation - **10.54%** B-heavy molasses share of the same allocation Sugar routes supplied about 32% of the ethanol delivered in ESY 2024-25, with grain providing the rest, although as of 30 November 2023 molasses-based distillery capacity, about 8.75 billion litres, still exceeded grain-based capacity of about 5.05 billion litres. C-heavy molasses, the traditional distillery feed, contributed only 1.16% of the latest allocation. Sources: [ChiniMandi](https://www.chinimandi.com/?p=350716); [ChiniMandi](https://www.chinimandi.com/?p=348019); [Down To Earth](https://www.downtoearth.org.in/amp/story/food/india-relaxed-cap-on-production-of-ethanol-from-sugarcane-and-paddy-after-8-months) ### 2. Cane split between sugar and ethanol *Joint production · Strong · Each tonne of sucrose goes one way or the other* Sucrose diverted to ethanol is sucrose not crystallised as sugar, so the sugar a country makes depends on how much its mills send to distilleries. - **35.01 lakh t** sugar diverted to ethanol in India, 2024-25 - **343.5 to 309.5 lakh t** India's gross to net sugar output, 2025-26 ISMA estimate Diversion of about 3.4 to 3.5 Mt a year takes about 10 to 12% of India's gross sugar output. In Brazil's Centre-South, mills crushed 611 Mt of cane in 2025/26 and made 40.43 Mt of sugar and 33.7 billion litres of ethanol; 27% of that ethanol came from maize, which frees cane for sugar. Sources: [ChiniMandi (ISMA data)](https://www.chinimandi.com/?p=349696); [Czarnikow (CZ App)](https://www.czapp.com/analyst-insights/unica-update-end-of-the-2025-26-harvest-and-beginning-of-2026-27/) ### 3. Diversion caps and E20 *Policy · High in India · Indian policy sets the split* India sets ethanol procurement prices by feedstock and can cap diversion, so the government decides how much sugar becomes fuel. - **20%** ethanol blending level reached in India by 2025 In December 2023 the government capped diversion of sugar to ethanol over concerns about lower sugar output, and in an order of 29 August 2024 it allowed mills to use cane juice, syrup and B-heavy and C-heavy molasses again for ESY 2024-25. Mills need predictable diversion rules to plan distillery investments. Sources: [ChiniMandi](https://www.chinimandi.com/?p=350716); [Down To Earth](https://www.downtoearth.org.in/amp/story/food/india-relaxed-cap-on-production-of-ethanol-from-sugarcane-and-paddy-after-8-months) ### 4. Price link: competing use *Cost and price · Moderate · Both ways* Brazilian mills shift cane between sugar and ethanol depending on which pays more, which ties world sugar to Brazilian ethanol, but the bioethanol series here is a US maize-based index, so the measured link is diluted. - **0.16** monthly change correlation - **0.33** 12-month change correlation - **0.58** fitted elasticity Ethanol parity acts as a soft floor under world sugar prices: when sugar trades below the ethanol equivalent, Brazilian mills make more ethanol and less sugar. At the start of 2026/27 sugar traded almost 4 US cents per pound below ethanol parity, pointing to a lower sugar mix. India's administered ethanol prices do not move with world sugar. Sources: [Material Insights (World Bank, FRED, IMF data)](https://www.materialinsights.org/energy/bioethanol/correlation/); [Czarnikow (CZ App)](https://www.czapp.com/analyst-insights/unica-update-end-of-the-2025-26-harvest-and-beginning-of-2026-27/) ## For investors ### Key learnings 1. Brazilian ethanol parity is the key floor for world sugar prices, so Brazilian petrol prices and ethanol taxes matter to sugar investors. 2. Indian sugar companies with distilleries have a second revenue line, but its size depends on diversion rules and feedstock-specific procurement prices set each year. 3. The rise of maize ethanol in both Brazil and India reduces the cane needed for fuel, which can leave more sugar for export. ### What to track - **UNICA sugar mix and ethanol parity**: A falling sugar mix signals less Brazilian sugar and firmer world prices (Fortnightly · UNICA) - **Indian ethanol procurement prices by feedstock**: Higher cane juice and B-heavy prices raise diversion and cut sugar output (Annually · Ministry of Petroleum and Natural Gas) - **ISMA estimates of diversion and net sugar output**: Larger diversion tightens the domestic sugar balance and export room (Several times a season · ISMA) ## For policymakers ### Key learnings 1. Diversion lets India absorb surplus cane without subsidised exports, but caps are needed in drought years to protect sugar supply. 2. Stable, multi-year rules for diversion and ethanol prices are what sugar mills need to finance distilleries. 3. Cane ethanol competes with food and with water-hungry cane cultivation, so grain and waste routes reduce pressure on sugar supply. ### What to track - **Net sugar output against consumption**: A thin margin raises the case for diversion caps or export curbs (Several times a season · ISMA, Department of Food and Public Distribution) - **Ethanol supplied by feedstock**: A falling sugar share shows grain routes taking over (Monthly · Oil marketing companies, Ministry of Petroleum and Natural Gas) ## India Indian mills diverted about 35 lakh tonnes of sugar to ethanol in 2024-25, about 12% of gross output, under rules the government tightened in 2023 and relaxed in 2024. ## Sources 1. [Price correlation, Material Insights](https://www.materialinsights.org/energy/bioethanol/correlation/), Material Insights (World Bank, FRED, IMF data) 2. [ESY 2024-25: Around 1002 crore litres of ethanol supplied during Nov 24 to Oct 25](https://www.chinimandi.com/?p=350716), ChiniMandi (2025) 3. [ESY 2025-26: OMCs allocate around 1048 crore litres for ethanol supply; maize holds share of around 45 per cent](https://www.chinimandi.com/?p=348019), ChiniMandi (2025) 4. [ISMA estimates net sugar production at 309.5 lakh tonnes in 2025-26 season](https://www.chinimandi.com/?p=349696), ChiniMandi (ISMA data) (2025) 5. [India relaxed cap on production of ethanol from sugarcane and paddy after 8 months](https://www.downtoearth.org.in/amp/story/food/india-relaxed-cap-on-production-of-ethanol-from-sugarcane-and-paddy-after-8-months), Down To Earth (2024) 6. [UNICA update: end of the 2025/26 harvest and beginning of 2026/27](https://www.czapp.com/analyst-insights/unica-update-end-of-the-2025-26-harvest-and-beginning-of-2026-27/), Czarnikow (CZ App) (2026)