Indian Oil Corp., along with Bharat Petroleum and Hindustan Petroleum, issued a tender on 16 October for 1,100 crore litres of denatured anhydrous ethanol for the 2026‑27 supply year. The bid bars sugarcane juice, sugar, and sugar syrup ethanol, forcing the OMCs to turn to C‑heavy molasses, damaged grains, and surplus rice from the Food Corporation of India.
The base procurement rate for maize‑derived ethanol is ₹66.07 per litre, with an extra ₹2.79 incentive, excluding GST. Damaged food grains fetch ₹64 per litre, surplus FCI rice ₹60.32, and C‑heavy molasses ₹57.97. The tender spans four quarters, but surplus‑rice bids are rejected in the fourth quarter.
With the higher maize rate, analysts predict a 2‑3% rise in input costs for the OMCs, squeezing gross margins that previously hovered around 12‑14% for ethanol sales. The restriction on sugar feedstocks also removes a cheaper 8‑10% cost‑saving channel that some refiners had relied on.
Legal uncertainties loom, as allocations for the first quarter remain contingent on pending court rulings over the OMCs’ allocation methodology. The companies reserve the right to revise or cancel allocations without liability if court orders change.
Looking ahead, the OMCs will need to revisit their pricing strategy for the 2027‑28 supply year to absorb the higher procurement cost. Analysts expect a modest 1‑2% adjustment in retail ethanol prices, which could ripple into higher gasoline blends and affect consumer demand in the next quarter.