Sugar price surge may hit ethanol output as mills eye better returns

Rising sugar prices could affect ethanol production as mills may find it more profitable to produce and sell sugar than divert cane or sugar for ethanol.

 

Sugar prices have been rising in India because of lower production, deficient rainfall in some regions and festival-season demand. To control prices, the government has restricted sugar exports and imposed stock limits. However, prices may remain firm, industry experts said.

 

Retail sugar prices have risen to ₹48-50 per kg, while wholesale prices have moved up to ₹4,750-4,800 per quintal because of tight supplies. At the end of June, the ex-factory price of S-grade sugar in Maharashtra and Karnataka was around ₹3,850 per quintal.

   

Industry experts believe prices may remain elevated until the start of the new sugar season. Higher sugar prices may discourage producers from diverting sugar or sugarcane for ethanol production.

Sugar may turn costlier in festival season

Sugar prices may rise further during the festive season. This would increase the burden on consumers and limit the government’s ability to release additional sales quota.

 

The government has imposed stock limits to keep prices under control. Under the order, sugar dealers cannot hold any stock for more than 30 days. They are also not allowed to hold more than 4,000 quintals of sugar at any location at a given time. Action will be taken against those holding stocks beyond the prescribed limit.

 

The order came into effect on August 1, 2026, and will remain valid until November 30, 2026.

Sugar more profitable than ethanol

All India Distillers’ Association president Vijendra Singh said ethanol prices had remained unchanged for a long time, while cane prices had risen about 16 per cent since ethanol prices were last revised in 2022-23. This has made ethanol production less remunerative for sugar mills.

 

Lower sugar stocks this year may also keep sugar prices elevated. At current ethanol prices, ethanol production will become even less profitable, Singh said.

 

Given the current trend in sugar prices, diversion of sugar for ethanol is expected to be lower in ethanol supply year 2026-27. If current sugarcane, sugar and ethanol prices continue, the industry may not produce ethanol from cane juice and B-heavy molasses. In such a situation, ethanol production may be limited to C-heavy molasses.

Industry seeks higher ethanol prices

Singh said ethanol producers were concerned about the current situation. If additional sugar is produced, it could put pressure on sugar prices in the long term.

 

The sugar industry generally diverts 2.5-3.5 million tonnes of sugar every year for ethanol production. If this diversion stops, sugar availability in the market may rise.

 

The association has urged the government to raise ethanol prices. As a long-term policy, ethanol production from surplus sugar should continue, Singh said, adding that the policy had already proved useful and benefited both sugarcane farmers and the sugar industry.

Sugar production likely to stay low

According to the Indian Sugar and Bio-energy Manufacturers Association (Isma), India’s sugar production in the current 2025-26 crushing season is estimated at about 27.9 million tonnes, while domestic consumption is expected to be around 28.5 million tonnes.

 

This means production may fall short of consumption for the second consecutive year. At the start of the season, the industry had estimated output at 30.9 million tonnes. However, weak sugarcane crops in Uttar Pradesh and Maharashtra led to a sharper than expected decline in production.

Low sugar stock raises concern

At the start of the current season on October 1, 2025, India had opening sugar stocks of around 47 lakh tonnes. With estimated production of 27.9 million tonnes, total availability stood at 32.6 million tonnes.

 

After domestic consumption of 28.5 million tonnes and exports of about 0.8 million tonnes, opening stocks on October 1, 2026, are expected to be only 3.3-3.5 million tonnes. This is seen as one of the lowest stock levels in several years.