Sugar-ethanol curbs put auto industry’s E20 transition to test; OMCs face ₹813-crore potential cost increase
BusinessLine 2 hrs ago·21 Oct 2026, 1:27 pm
The government's decision to restrict the use of B-heavy ethanol in petrol is creating a ripple effect across the fuel and auto sectors. This move aims to divert more B-heavy ethanol for industrial use, but it has forced Oil Marketing Companies (OMCs) to look for alternatives like maize-based ethanol. This shift is expected to raise the cost of fuel production, potentially impacting the profitability of state-run fuel retailers.
For investors, this development signals a short-term headwind for OMCs, as they absorb higher input costs. While the auto industry faces challenges in meeting the mandate for E20 fuel, the long-term outlook remains tied to the government's push for cleaner energy. Market participants should monitor how quickly OMCs can adjust their procurement strategies and whether the government will provide any subsidies to cushion the impact on margins.
Excerpt from BusinessLine
Oil marketing companies could face additional procurement costs of ₹813 crore for every 100 crore litres of cheaper B-heavy molasses ethanol replaced by maize, following government restrictions on sugar-based supplies for 2026-27. The switch would raise costs from ₹60.73 to ₹68.86 per litre, a 13.4 per cent increase…Read the original at BusinessLine
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