India’s Sugar Output to Rise 15% in 2026 on Strong Monsoon: CRISIL

India’s gross sugar production is expected to increase by 15% in the 2025-26 sugar season (SS26), reaching approximately 35 million tonnes, according to a recent report by CRISIL Ratings. The rise will be driven by an above-average monsoon, which is likely to improve cane acreage and boost yields, particularly in major sugar-producing states like Maharashtra and Karnataka.

This projected growth in sugar output is anticipated to ease domestic supply constraints, create room for higher ethanol diversion, and revive export opportunities, provided there is supportive government policy, the report added.

Ethanol Blending to Rise, Margins to Recover

With improved supplies, the diversion of sugar for ethanol production is expected to increase to 4 million tonnes in SS26 from 3.5 million tonnes in SS25. This aligns with the Indian government’s push towards achieving a 20% ethanol blending target, with the current average standing at 19%. Ethanol production offers sugar mills a quicker turnaround on cash flows, making it an attractive channel.

As a result of better supply and rising ethanol diversion, the operating margins of sugar mills are projected to recover to 9-9.5% in fiscal 2026. This recovery should support the credit profiles of sugar companies, which had come under pressure due to subdued margins in the last fiscal year.

Despite an 11% increase in the fair and remunerative price (FRP) of sugarcane over the past two seasons, ethanol prices have remained largely flat, further intensifying the need for increased operational efficiency and better product mix.

Sugar Prices and Export Outlook for 2026

Meanwhile, domestic sugar prices have been stable in the range of Rs 35–38 per kg during the current season. With output set to rise, prices are expected to remain range-bound in the near future.

India exported 1 million tonnes of sugar in SS25. With the anticipated increase in production and an opening stock equivalent to two months of domestic consumption, the country is well-positioned to sustain similar export levels in SS26, provided favourable policies are in place.

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