The government has decided to allow sugar mills to manufacture ethanol directly from sugarcane juice or intermediate product called B-molasses.
The sugarcane control order of 1966 has been amended as notified by the Union Food Ministry.
The move would help mills divert cane juice for ethanol manufacturing during surplus years. So far, mills were allowed to manufacture ethanol from by-product called C-molasses, after sugar was taken out while processing raw cane juice.
Last month, the government for the first time also fixed the price of ethanol produced from intermediary or B-molasses at 47 rupees 49 paise per litre for the marketing year starting December 2018.
The price of ethanol produced from C-molasses has been raised by 3 rupees per litre to 43 rupees 70 paise per litre.
India, which is over 80 per cent dependent on imports to meet its oil needs, has mandated blending of up to 10 per cent ethanol in petrol but inadequate availability has restricted this to under 4 per cent.
Oil marketing companies procure ethanol from sugar mills for blending with petrol. Mills are expecting revenue realisation of over 5,000 crore rupees from sale of ethanol to OMCs during the 2017-18 sugar season.