BIEPA Seeks Review of Ethanol Supply Tender Allocation Methodology for ESY 2026-27

The Bharat Independent Ethanol Producers Association (BIEPA), which represents independent dedicated ethanol manufacturers across India, has formally requested the Union Ministry of Petroleum and Natural Gas and oil marketing companies (OMCs) to review the allocation methodology for the Ethanol Supply Year (ESY) 2026-27 tender. The association's primary concern centres on the double preference extended to long-term offtake agreement (LTOA) holders within the tender framework.

The upcoming tender covers approximately 1,100 crore litres of ethanol. According to BIEPA, LTOA holders receive priority for contracted quantities alongside an additional preference on a best-endeavour basis up to their accepted expression of interest design capacity. The association notes that this structure could leave other eligible producers with only remaining quantities, even when those manufacturers offer ethanol at lower price points.

The pricing structure outlined in the tender sets maize-based ethanol at ₹68.86 per litre, which includes ₹66.07 plus an incentive of ₹2.79. Ethanol sourced from damaged food grains is priced at ₹64.00 per litre, while ethanol from Food Corporation of India surplus rice is pegged at ₹60.32 per litre.

In its media statement, BIEPA specifically pointed to the first level of procurement preference under Clause 6.2 of the LTOAs. This clause prioritises allocations to LTOA holders over other eligible suppliers regardless of price. BIEPA argues that while such agreements provide offtake commitments on a best-endeavour basis, they should not justify procuring higher-priced ethanol when lower-cost alternatives are accessible from equally qualified manufacturers. The association cautions that such procurement patterns could lead to avoidable additional expenditures for OMCs, the exchequer, and the public.

Pushpinder Singh Mamik, President of BIEPA, stated that long-term agreements were originally intended to assure quantity on a best-endeavour basis. He emphasized that procurement should give due consideration to compliant ethanol when it is available at a lower price.

Many independent dedicated ethanol plants were established in direct response to the government's Ethanol Blended Petrol Programme. These facilities relied on interest-subvention schemes from the Department of Food and Public Distribution alongside substantial bank financing. Environmental approvals restrict these plants to producing ethanol specifically for blending, which limits their capacity to divert output to alternative markets.

BIEPA has warned that the current allocation framework could leave these independent plants underutilised, create difficulties in servicing bank loans, and negatively impact farmers who supply grain as well as the rural employment supported by these facilities. Mamik added that independent producers invested in capacity based on government policy, and leaving these units with only residual quantities puts their investments and underlying loans at risk, necessitating a level-playing field.

Ahead of the finalisation of ESY 2026-27 allocations, BIEPA has asked the ministry and OMCs to consider price alongside contractual commitments, withdraw or clarify the contractual basis of the additional preference, ensure transparent and equitable allocation among all eligible suppliers, and disclose the financial implications of preferential allocations.

Despite these concerns, BIEPA reiterated its support for the government's ethanol blending objectives, noting that a financially sustainable and competitive domestic industry remains vital for protecting the investments made toward the programme.

"The concerns raised by independent ethanol producers highlight the delicate balance required in public procurement policies between honoring long-term commitments and maintaining market competitiveness. When policy-driven sectors rely heavily on institutional financing, ensuring a fair allocation mechanism that accounts for pricing efficiency is essential to protect capital investments, sustain rural employment, and maintain fiscal prudence for public sector undertakings." — Dr. Shishir Gupta, Founder & CEO, StartupLanes