Mumbai: Rising sugar prices and unchanged ethanol procurement rates could reduce the diversion of sugar and sugarcane for ethanol production in the 2026-27 ethanol supply year, as sugar mills are expected to prioritise sugar production over ethanol, industry officials said, according to Business Standard.
Sugar prices have climbed sharply in recent weeks due to lower domestic production, below-normal rainfall in some cane-growing regions and strong demand ahead of the festive season. Retail prices have risen to Rs 48-50 per kg, while wholesale prices have increased to Rs 4,750-4,800 per quintal. Ex-factory prices of S-grade sugar in Maharashtra and Karnataka stood at around Rs 3,850 per quintal at the end of June.
Industry experts said sugar prices are likely to remain firm until the start of the new crushing season, making sugar production more remunerative than ethanol manufacturing.
To contain domestic prices, the Centre has restricted sugar exports and imposed stock limits on sugar dealers from August 1 to November 30, 2026. Under the order, dealers cannot hold sugar stocks for more than 30 days or more than 4,000 quintals at any one location.
All India Distillers’ Association (AIDA) President Vijendra Singh said ethanol procurement prices have not been revised since the 2022-23 ethanol supply year, while the Fair and Remunerative Price (FRP) of sugarcane has increased by around 16% during the same period.
“The economics of ethanol production have weakened as cane prices have increased while ethanol prices have remained unchanged. At current sugar prices, mills are likely to find sugar production more profitable,” Singh said.
He added that if the existing price scenario continues, sugar mills may significantly reduce ethanol production from sugarcane juice and B-heavy molasses and instead limit production largely to C-heavy molasses.
The industry has urged the government to revise ethanol procurement prices to improve project viability and sustain the ethanol blending programme. Singh said diverting surplus sugar to ethanol has helped balance sugar supplies while providing better returns to sugar mills and sugarcane farmers.
The sugar industry typically diverts between 2.5 million and 3.5 million tonnes of sugar annually for ethanol production. A decline in diversion could increase sugar availability over the longer term, although current supplies remain tight.
According to the Indian Sugar and Bio-energy Manufacturers Association (ISMA), India’s sugar production in the 2025-26 crushing season is estimated at around 27.9 million tonnes, while domestic consumption is expected to reach about 28.5 million tonnes. This would mark the second consecutive year in which production falls short of consumption.
The industry had initially projected sugar production at 30.9 million tonnes but later revised the estimate downward following weaker-than-expected sugarcane crops in Uttar Pradesh and Maharashtra.
India began the current sugar season with opening stocks of about 4.7 million tonnes. After accounting for production, total sugar availability is estimated at 32.6 million tonnes. Following domestic consumption and exports of around 0.8 million tonnes, opening stocks for the 2026-27 season are projected at just 3.3-3.5 million tonnes, among the lowest levels seen in recent years.
Industry officials said low production, declining stocks and firm demand are likely to keep sugar prices elevated in the near term, posing a challenge to ethanol production unless procurement prices are revised.
