India’s Sugar Output Likely to Rise 15% in 2026 Season: CRISIL Ratings

27-Jun-2025 01:02 PM

India’s Sugar Output Likely to Rise 15% in 2026 Season: CRISIL Ratings
★ India’s gross sugar production is expected to increase by about 15% to 35 million tonnes in the 2026 sugar season, which begins in October. This rise is primarily attributed to improved cane sowing and yield in key states like Maharashtra and Karnataka, supported by a favourable monsoon.
★ The expected increase could improve domestic availability. With higher diversion to ethanol and appropriate policy support, sugar exports may also resume.
★ In 2025, the operating margin of sugar mills declined by nearly 200 basis points to 8.7–9%. This was mainly due to high cane costs, stagnant ethanol prices, and weak export demand.
★ For 2026, operating margins are projected to improve to 9–9.5% on the back of higher production and increased diversion towards ethanol.
★ Over the past two years, the Fair and Remunerative Price (FRP) of sugarcane has risen by 11%, while ethanol procurement prices have remained flat, squeezing mill profitability.
★ Ethanol diversion is expected to reach 4 million tonnes in the 2026 season, up from 3.5 million tonnes in 2025. This aligns with the government’s 20% ethanol blending target, which has so far averaged around 19%.
★ Domestic sugar prices are currently stable at ₹35–38 per kg and are expected to remain range-bound due to surplus production.
★ Sugar exports stood at just 1 million tonnes in 2025, and could remain at similar levels in 2026 if production and stock levels are sufficient.