India Withdraws Draft Sugarcane Control Order 2026 After States and Farmers Raise Ethanol Regulation Concerns

The Quick Take

• India's central government withdrew the draft Sugarcane Control Order, 2026 following objections from state governments and industry stakeholders, shelving a regulatory proposal that would have expanded oversight of the ethanol and khandsari sectors.
• The draft order aimed to replace the old Sugarcane Control Order and bring ethanol production and khandsari (raw sugar) units under a new regulatory framework, but raised concerns about impact on small-scale producers and farmers.
• The withdrawal is broadly seen as a farmer-friendly political decision, prioritising agricultural income protection over regulatory expansion in the politically sensitive sugar sector.

India's central government has formally withdrawn the draft Sugarcane Control Order, 2026 after receiving substantive objections from multiple state governments and sugar industry stakeholders. The draft order had been designed to replace the existing regulatory framework and would have extended formal oversight to the ethanol blending sector and khandsari units — small traditional raw sugar mills — which had previously operated in a regulatory grey zone. Concerns centred on the compliance burden for small khandsari producers and the potential for reduced farmer support prices if the new order altered existing procurement mechanisms.

The withdrawal reflects a recurring tension in India's agricultural policy: regulatory modernisation goals often collide with the political and economic sensitivities surrounding sugarcane farmers, who represent a significant voter constituency in key states including Uttar Pradesh, Maharashtra, and Karnataka. The ethanol blending programme — under which sugar mills divert sugarcane juice or B/C molasses to produce fuel ethanol under government targets — has been a significant earnings uplift for the sugar sector; any regulatory uncertainty around ethanol eligibility under a new order would have directly affected the revenue diversification thesis for listed sugar companies.

Watch for the government to introduce a revised version of the order that addresses stakeholder concerns while preserving the ethanol programme's incentive structure, likely after broader consultations with state governments during the off-season. The macro variable is global sugar price trajectories and domestic ethanol blending targets: if the government raises blending mandates toward the 20% target for 2025-26, sugar companies' earnings profiles become increasingly dependent on ethanol realisations rather than white sugar prices, making regulatory clarity about khandsari and ethanol eligibility increasingly material for sector valuation.

Synthesized from 1 source.