Sugar, Ethanol — and the Water Nobody Is Counting
· @Hemen Parekh
The news
The Times of India reports today (5 October 2026) that the Government is set to bar the diversion of sugarcane juice, syrup and B-heavy molasses for ethanol in the 2026-27 Ethanol Supply Year, which begins on 1 November. A formal notification is expected soon.
The reasons given:
- Sugar production in the 2025-26 season fell about 11% short of initial estimates.
- A further decline is expected because of drought in Maharashtra and Karnataka, the two biggest cane-growing states.
- The new season opened on 1 October with stocks of around 37.5 lakh tonnes, against nearly 50 lakh tonnes a year ago.
So mills will be limited to making ethanol from C-heavy molasses, the final by-product from which no more sugar can be extracted. The aim is to protect the sugar on our breakfast tables.
Fair enough. But notice the word buried in the middle of that news: drought.
The real shortage is water, not sugar
Our sugar output has fallen because the cane fields of Maharashtra and Karnataka did not get enough water. And what were we planning to do with a large part of that cane? Turn it into fuel.
I have written about this several times over the years: sugarcane is one of the thirstiest crops we grow, and we grow it in some of our driest regions. Consider the numbers:
- NITI Aayog's own 2020 report estimated that every litre of ethanol from sugarcane consumes at least 2,860 litres of water.
- Farmers in Maharashtra have told reporters that one tonne of cane can soak up about 3 lakh litres of water over a growing cycle.
- A large part of Maharashtra's cane belt sits in a drought-prone, rain-shadow zone.
The industry contests some of these figures, and an ICAR-IISR study puts the water need nearer 2,000 litres per litre of ethanol. Even at that lower number, the arithmetic is sobering. Every litre of ethanol blended into petrol carries the hidden cost of roughly two thousand litres of water — water drawn from aquifers that are already falling.
We are, in effect, pumping our groundwater into our petrol tanks.
A ban for the wrong reason
The Government's decision is welcome, but its logic worries me. The diversion is being stopped because sugar is short this year, not because water is short every year.
We have seen this film before:
- In December 2023, cane-juice diversion was banned — then partly reversed within a week after industry pressure.
- For 2025-26, all restrictions were lifted, and juice and molasses could be used without any volume limit.
- Now, in 2026-27, the ban returns.
This is policy that follows the sugar price, swinging open and shut with each monsoon. When the next good rain comes and stocks recover, the diversion will be allowed again, and the water will once again flow into the ethanol tank.
And the shift to grain is no escape
With cane restricted, distilleries are turning to maize, which already supplies about three-quarters of our ethanol. But maize is thirsty too. Recent estimates put it at about 4,670 litres of water per litre of ethanol, and rice-based ethanol at over 10,000 litres.
Swapping one water-guzzling feedstock for another does not solve the problem. It only moves it from one field to the next — and adds a new conflict between food, feed and fuel.
What I suggest
If we are serious about both energy security and water security, ethanol policy must be decided by a water ledger, not only a sugar ledger.
- Water-footprint test before every diversion decision. Each year's allocation of cane, molasses or grain to ethanol should be approved only after checking groundwater levels in the source districts.
- No new cane-based distilleries in over-exploited blocks. Ethanol capacity should not be licensed where the aquifer is already in deficit.
- Mandatory drip irrigation for cane supplying ethanol plants. Drip can cut cane water use substantially; mills buying cane for fuel should be required to source it from drip-irrigated farms.
- Push second-generation ethanol from bagasse, rice straw and other crop waste. This needs no extra water for cultivation — and it gives us a use for the paddy straw that is burned every winter across North India.
- Treat ethanol as a bridge, not a destination. The long-term answer to imported crude is electric mobility powered by solar — not more irrigated cane.
A closing thought
This year, drought has forced the Government to choose between sugar and fuel. It chose sugar, and rightly so.
But the bigger choice is still being postponed: between fuel and water. Sooner or later, that choice will be forced on us too — and by then, the wells of Marathwada may have already made it for us.
Let us make it now, by design, rather than later, by drought.
With regards,
Hemen Parekh
www.HemenParekh.ai | www.IndiaAGI.ai | www.HemenParekh.in
Sources
- Times of India — Government set to halt sugarcane juice, B-heavy molasses diversion for ethanol
- ChiniMandi — Government may halt sugar diversion for ethanol in 2026-27
- Mongabay India — Water intensity of sugarcane ethanol
- ChiniMandi — ICAR-IISR report on sugarcane water use
- Water Today — Water footprint of rice, maize and sugarcane ethanol
- Whalesbook — New ethanol policy shifts focus to grains
- Business Standard — 2023 ban on cane juice for ethanol
- Business Standard — Unrestricted diversion allowed for ESY 2025-26
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