Will India’s Sugar Production Surge by 15% to 35 Million Tonnes Due to Favorable Monsoon?
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Synopsis
India's sugar production is projected to rise by 15% in 2026, reaching 35 million tonnes, thanks to favorable monsoon conditions. This change promises to ease domestic supply constraints and boost the sugar industry's financial health. Discover how these factors can reshape India's sugar landscape in the coming season.
Key Takeaways
- Projected sugar production increase of 15% in 2026.
- Expected production to reach around 35 million tonnes.
- Favorable monsoon conditions boosting cane acreage and yields.
- Potential recovery of sugar mills' operating margins.
- Increased diversion for ethanol blending anticipated.
New Delhi, June 27 (NationPress) India’s overall sugar production is projected to increase by 15 percent in the sugar season of 2026, reaching approximately 35 million tonnes. This uplift is primarily supported by a favorable monsoon, which has enhanced both cane acreage and yields in vital sugar-producing regions like Maharashtra and Karnataka, according to a report from Crisil released on Friday.
This growth is anticipated to alleviate domestic supply constraints and could facilitate an uptick in ethanol diversion, alongside reviving exports with suitable policy backing.
In the fiscal year 2026, improved sugar availability and a likely increase in sugar diversion for ethanol blending with gasoline are expected to boost the operating margins of sugar mills to around 9-9.5 percent. This development should enhance the credit profiles of sugar companies, which faced some challenges in the previous fiscal period.
Over the last two seasons, while the fair and remunerative price (FRP) of sugarcane has climbed by 11 percent, ethanol prices have primarily remained stable.
For the sugar season of 2026, ethanol diversion is estimated to rise to 4 million tonnes (up from 3.5 million tonnes in sugar season 2025), buoyed by increased sugar production and the government's 20 percent blending target, which has achieved an average of 19 percent so far. This is advantageous as it allows for quicker cash-flow turnover, the report noted.
Meanwhile, domestic sugar prices have stabilized at about Rs 35-38 per kg this season. With anticipated production increases, sugar prices are likely to remain within a specific range.
Exports, which stood at 1 million tonnes in the sugar season 2025, are expected to maintain similar levels in 2026 due to robust sugar production and an opening inventory equivalent to 2 months of consumption.
“Sugar inventory levels at the conclusion of fiscal 2026 are projected to remain comparable to last year, thereby minimizing the increase in working capital debt despite heightened distillery activities,” stated Poonam Upadhyay, Director of Crisil Ratings.
For the forthcoming season, critical factors to monitor in the sector include the temporal and spatial distribution of the monsoon, its impact on cane yield, timely adjustments in ethanol pricing, and clarity regarding export policies in light of global sugar price fluctuations, as highlighted in the report.
Point of View
The anticipated rise in sugar production reflects both the resilience of the agricultural sector and the effectiveness of favorable monsoon conditions. It showcases India's potential to balance domestic needs and export opportunities in the sugar market, something that could significantly enhance the economic landscape.
NationPress
27/06/2025
Frequently Asked Questions
What factors are influencing the rise in sugar production?
The rise in sugar production is primarily driven by favorable monsoon conditions, which enhance cane acreage and yields in key producing states.
How will this increase in production affect sugar prices?
With expected higher production levels, sugar prices are likely to remain stable and range-bound.
What is the expected ethanol diversion for the upcoming season?
Ethanol diversion is projected to increase to 4 million tonnes in the sugar season of 2026.
How does this impact the operating margins of sugar mills?
The operating margins of sugar mills are expected to recover to around 9-9.5 percent due to improved supplies.
What are the key watchpoints for the sugar sector?
Key watchpoints include the distribution of the monsoon, its impact on cane yield, ethanol price revisions, and export policy clarity.
