India's sugar supply declines, prices remain under pressure despite record cane production

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India's sugar supply and prices

Highlights

On Sunday, the all-India average retail price of sugar reached ₹64.24 per kilogram, up 1.77 percent from a week earlier.
For the 2025-26 season, sugar production is estimated at 3.06 million metric tonnes, significantly lower than the initial forecast of 3.43 million metric tonnes.
Despite export restrictions and increased import quotas, the main reason for the price rise is the weak recovery rate and declining sugar production.

This article was translated from the original. Read the original version by our correspondent here.

Production Estimates, Recovery, and Policy Changes

According to Forbes India, sugar mills are not able to extract the expected amount of sugar from cane this season, as recovery rates decline and initial production estimates do not hold up. Data from the Ministry of Consumer Affairs shows that on Sunday, the all-India average retail price of sugar was ₹64.24 per kilogram, up 1.77 percent from ₹63.12 per kilogram a week earlier.

The Ministry of Agriculture's third advance estimate released on May 27 projected sugarcane production at 50.0063 million tonnes, but record cane output does not translate to proportionally higher sugar production. This season, the national average recovery rate has dropped from about 9.70 percent to 8.91 percent, putting direct pressure on total sugar output.

Deepak Ballani, Director General of the Indian Sugar and Bio-energy Manufacturers Association, says that total cane production this season remains largely similar to last year's 39 million tonnes, but adverse weather and agricultural factors have reduced the sucrose content per tonne of cane. According to him, unseasonal rains, prolonged cloud cover, and temperature fluctuations in Maharashtra have reduced recovery by 10 to 12 percent, while in Uttar Pradesh, lower yields from ratoon crops have limited extraction capacity.

The government attributes the production decline to red rot, top borer, and waterlogging from excessive rainfall. For the 2025-26 season, sugar production is now expected to be around 3.06 million metric tonnes, significantly lower than the initial estimate of about 3.43 million metric tonnes.

In November 2025, the government allowed mills to export about 1.5 million tonnes of sugar and later increased the quota to 2 million tonnes, as policymakers expected domestic supply to remain comfortable. Ultimately, only about 0.8 million tonnes were shipped, after which export restrictions were imposed in May due to supply pressures, and now duty-free import of 1 million tonnes of raw sugar is allowed until October 31.

Market Impact and Ethanol Debate

According to ICRA Vice-President and Sector Head Rachit Mehta, the main reasons for tight sugar availability are lower-than-expected production, declining stocks, and seasonal demand ahead of the festival period. He notes that exports have only a limited impact on stock depletion and are not the main reason for the recent price rise.

The ethanol blending program often emerges as an easy explanation in the sugar price debate, as mills can produce ethanol from cane, cane juice, and other cane-based feedstocks instead of sugar. However, the Ministry of Consumer Affairs says that linking the recent rise in sugar prices to the diversion for ethanol is not accurate, as the share of sugar diverted for ethanol has fallen from about 12 percent in 2022-23 to around 9 percent in 2025-26, while nearly three-quarters of India's ethanol production now comes from grains, especially maize.

Still, ethanol has transformed surplus cane management and the economics of the sugar industry. Diverting some feedstock to ethanol during times of abundant supply can support mills and prevent excess sugar stocks, while in the current season, market pressure mainly stems from weak recovery and lower production estimates.

Ballani says ethanol blending does not compete with domestic food security and is not the reason for the recent price rise, as allocations for ethanol are decided only after securing the buffer at the start of the season. Mehta estimates that India is expected to have stocks equivalent to more than two months of consumption, which should be sufficient for festival demand.

Our previous report, based on ICRA's research assessment, stated that the July 2026 indicators show signs of overall growth as well as a slowdown in several sectors. It highlighted weak rainfall and rising inflation as key near-term risks, emphasizing the likelihood of increased demand and cost pressures on industrial, transport, and consumer activities.

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