Surplus sweetness turns sour: India’s sugar industry faces mounting challenges in 2025-26 season
India’s sugar sector, long a cornerstone of the rural economy, is grappling with a paradoxical crisis in the 2025-26 season: record production amid stagnating demand, limited ethanol diversion, and subdued global prices. As mills crush sugarcane at a frenetic pace, industry leaders warn of piling stocks, squeezed margins, and delayed farmer payments unless urgent policy interventions are made.
By December 31, 2025, sugar production reached approximately 119 lakh tonnes, a robust 25 per cent increase from the previous year, according to the Indian Sugar & Bio-energy Manufacturers Association (ISMA). Maharashtra led the surge with 48.61 lakh tonnes, up 62 per cent, while Uttar Pradesh and Karnataka also posted gains. Projections for the full season vary, with USDA estimating 35 million tonnes and ISMA around 34.35 million tonnes, driven by expanded acreage and favorable monsoons.
This bounty, however, comes against softening domestic consumption. Estimates peg demand at 28-28.5 million tonnes, influenced by heightened health awareness. Government campaigns, including FSSAI’s “sugar boards” in schools and public spaces highlighting risks of excessive intake, have amplified concerns over diabetes affecting over 100 million Indians and obesity.
Reduced ethanol diversion
Compounding the issue is reduced diversion to ethanol. Despite achieving 20 per cent blending in November 2025, Oil Marketing Companies allocated only about 289-307 crore litres from sugar-based feedstocks for ESY 2025-26, favoring grains (over 70 per cent share) for food security. This limits diversion to 34 lakh tonnes, far below the 50 lakh tonnes mills targeted, leaving more physical sugar in the market.
Ex-mill prices reflect the glut, hovering at ₹3,600-3,720 per quintal in Maharashtra—down 8-10 per cent since the season’s start and below production costs for many. The government’s 15 lakh tonnes export quota has seen a tepid response due to low global prices, with reviews slated post-March 2026.
Mills face additional strains: storage shortages forcing some Maharashtra distilleries to halt operations, risking factory shutdowns if molasses piles up. With sugarcane FRP at ₹355/quintal and unchanged sugar MSP (₹31/kg since 2019), liquidity crunches threaten cane arrears.
Hinging on policy tweaks
Industry bodies like ISMA and NFCSF demand hikes in ethanol prices (stagnant for sugarcane routes), sugar MSP to ₹39-41/kg, and expanded exports. They argue for rebalancing allocations to utilize expanded distillery capacity (>1,800 crore litres).
As half the crushing season completes, the sector’s fate hinges on policy tweaks. While public health gains from lower consumption are welcome, balancing farmer livelihoods and biofuel goals remains critical. Without relief, the sweet surplus could turn bitterly unviable for millions dependent on sugarcane.
(The author is Managing Director of Samarth SSK Ltd and Co-Chairperson of the Sugar Bioenergy Forum (SBF) under the Indian Federation of Green Energy.)
Published on January 11, 2026
