Molasses Shortage Halts Ethanol Output at Indian Sugar Cooperative

The distillery attached to the Mohanur Cooperative Sugar Mill in Tamil Nadu's Namakkal district has not produced any alcohol for about five months because the mill no longer generates enough molasses to keep it running. The unit, which can process 40,000 liters of molasses per day, turns this sugar by-product into rectified spirit and fuel-grade ethanol that is sold to distilleries, laboratories and other industrial users or blended with petrol. As of mid-October 2026, production remains suspended and no official restart date has been announced.

The shortage stems from a steep fall in sugarcane crushing at the mill. Molasses is the thick syrup left behind once sugar crystals have been extracted, so the volume available to the distillery depends directly on how much cane passes through the factory. During the 2025-26 season, which opened on November 15, 2025, the cooperative processed only around 65,000 tonnes of sugarcane, according to its management. That is a modest amount for a plant designed to crush 2,500 tonnes a day, and it left far too little molasses to keep the distillery supplied once the crushing campaign was over.

The timing is particularly painful because the cooperative has recently invested in the facility. According to local growers, the mill spent close to Rs 5.57 crore (about $630,000) in 2025 to modernize and expand its distillery and ethanol units. The plant therefore has the equipment it needs but lacks the raw material to use it. O B Kuppudurai, secretary of the Sugarcane Farmers' Association, pointed out that the distillery was set up roughly 30 years ago and has long supplied alcohol to several industries, and he described the current halt as a serious financial setback for the cooperative.

Alcohol sales have traditionally been one of the mill's main sources of income alongside sugar. S Murugesan, a member of the sugarcane growers' association, said the prolonged shutdown is squeezing the cooperative's cash flow and making it harder to repay bank loans and cover routine operating costs. The mill's management has not publicly commented on these claims and no audited figures have been released. There is also no indication that the mill has defaulted on its debts or that its sugar operations have been affected beyond the distillery.

Relations between the mill and its growers were already strained before the distillery went quiet. In January 2026, farmers staged a protest in front of the mill to demand a special state incentive guaranteeing Rs 4,000 per tonne of cane. The mill had promised that price before the season but said it could only pay it once the Tamil Nadu government issued the corresponding order. Sugar recovery at Mohanur improved to 7.2% last season from 6.8% a year earlier, yet it remains well below the 9.5% benchmark used to set the national fair price for cane, which reduces what local growers can earn. Farmer groups across Tamil Nadu have also reported falling cane yields per acre, and other cooperative mills in the state, such as the one in Vellore, have lowered their crushing targets as cultivation shrinks.

Growers have put forward two ways to restart the distillery. The first is to buy molasses from other cooperative sugar mills in Tamil Nadu, especially those that have no distillery of their own and could sell their surplus. Such transfers already happen in the industry, as at least one private sugar group in the state has reported buying tens of thousands of tonnes of molasses from other factories when its own supply ran short. For Mohanur, the practicality of this option will depend on how much molasses is available, its quality and price, transport costs and the excise permits required to move it.

The second proposal is to produce alcohol and ethanol directly from sugarcane juice during the coming crushing season, which would reduce the distillery's dependence on molasses. National policy now makes this route much harder. In early October 2026, reports indicated that New Delhi would restrict the use of cane juice, syrup and B-heavy molasses for ethanol amid a drop in sugar output caused by drought in Maharashtra and Karnataka. On October 17, the Centre directed state-run oil companies to stop buying ethanol made from these feedstocks for the supply year starting November 1, 2026, in order to protect domestic sugar availability after a weak monsoon. Ethanol made from final molasses and from grains can still be supplied, which keeps Mohanur's traditional production route open, but only if the mill can secure enough feedstock.

The outlook for the coming months will largely depend on the next crushing campaign, which is expected to start around November as it did last year. If cane arrivals stay low, the distillery could remain idle well into 2027 unless the mill finds outside molasses. At the national level, the impact on fuel supply is limited, since roughly three-quarters of India's ethanol now comes from grains and the country has already reached its 20% petrol blending target. For the cooperative and its growers, however, the case highlights how a modern processing unit can sit unused when the agricultural supply chain feeding it weakens, and how quickly that gap can turn into a cash flow problem for a farmer-owned mill.