India’s gross sugar production is projected to rise by 15% in the 2025–26 season (October–September) to around 35 million tonne (MT), driven by expectations of an ‘above-average’ monsoon, which is likely to boost cane acreage and yields in key producing states such as Maharashtra and Karnataka, according to Crisil Ratings.The anticipated growth in output is expected to ease tightness in domestic supply and may also support higher ethanol diversion and a potential revival in sugar exports, the agency said.
“This would offer sugar mills some relief from the trifecta of challenges of high cane costs, subdued ethanol prices and muted exports that compressed their operating profitability by 200 basis points to 8.7 – 9% in fiscal 2025,” Crisil said.Earlier, the Indian Sugar and Bio-Energy Manufacturers Association (ISMA) projected a strong recovery in sugar output for the next season, from a projected five-year low of 29.5 MT in the ongoing 2024–25 season.
The diversion of sugar for ethanol production is also expected to rise to 4 MT in the 2025–26 season, up from 3.5 MT in the current season. This increase will be supported by higher sugar output and aligns with the government’s target of achieving 20% ethanol blending in petrol, which offers faster cash flow turnover for mills.“The strategic diversification to ethanol was intended to de-risk earnings and cash flow of sugar mills.
But rising cane costs as cane the fair and remunerative prices (FRP) has been hiked by 4.5% to Rs 355/quintal for 2025-26 season and stagnant ethanol procurement prices have limited improvement in profitability,” Anuj Sethi, senior director, Crisil Ratings, said.Crisil stated that domestic sugar prices have remained steady in the Rs 35–38/kg range this season. “With output expected to rise, sugar prices are likely to remain range-bound, limiting any significant upside in profitability of sugar millers,” it stated.
The firm has stated that in next fiscal (FY27), with improved supplies and potentially higher diversion of sugar for blending ethanol with gasoline, the operating margin of sugar mills is likely to recover to about 9% – 9.5%. This should support credit profiles of sugar players, which saw some pressure last fiscal.Looking ahead to FY27, Crisil projects that better sugar availability and potentially higher diversion for ethanol blending will help sugar mills recover margins to around 9–9.5%, aiding the credit profiles of industry players that faced pressure last fiscal year.
ISMA is expected to release its first production estimate for next season in July or August.“Sugarcane planting has improved in key producing states like Maharashtra and Karnataka, supported by favorable weather conditions and last year’s monsoon season enhanced cane planting, setting the stage for an on-time start of the crushing season in October 2025,” Deepak Ballani, director general, ISMA had earlier told FE.
The Indian Meteorological Department has forecast an ‘above-normal’ southwest monsoon for 2025, which is crucial for sugarcane cultivation. Despite lower-than-expected production in the current season, ISMA has stated carry forward stock for the next season on October 1, 2025 will be in the range of 5.2 – 5.3 MT which would be sufficient to meet domestic demand for the first two month of 2025-26 season.
The current sugar season commenced with opening stock of 8 MT on October 1, 2024. After restricting the sweetener exports in 2023-24 season, the government in January, 2025 had allowed the exports of one MT of sugar in the ongoing 2024-25 season, after taking into consideration domestic availability and diversion towards ethanol production.