Sugar Mills To Benefit From Better Output And Ethanol Diversion In 2026: Report

The growth is expected to ease tightness in domestic supply and has the potential to boost ethanol diversion and revive exports with appropriate policy support

Sugarcane harvest in Maharashtra amid favourable monsoon, expected to drive sugar output growth in FY26.

Source : Agri farming

India’s gross sugar production is likely to rise 15 per cent in sugar season 2026 to about 35 million tonnes, aided by above average monsoon, boosting cane acreage and yields in key sugar producing states such as Maharashtra and Karnataka, a Crisil report showed on Friday.

The growth is expected to ease tightness in domestic supply and has the potential to boost ethanol diversion and revive exports with appropriate policy support.

In fiscal 2026, with improved supplies and potentially higher diversion of sugar for blending ethanol with gasoline, the operating margin of sugar mills is likely to recover to about 9-9.5 per cent. This should support credit profiles of sugar players, which saw some pressure last fiscal.

Over the past two seasons, while the fair and remunerative (FRP) price of sugarcane has risen 11 per cent, ethanol prices have largely remained unchanged.

In sugar season 2026, diversion for ethanol is expected to rise to 4 million tonnes (from 3.5 million tonnes in sugar season 2025), supported by high sugar output and the government’s 20 per cent blending target (19 per cent average achieved so far), as it offers faster cash-flow churn, the report mentioned.

Meanwhile, domestic sugar prices have held steady at Rs 35-38 per kg this season. With output expected to rise, sugar prices are likely to remain range-bound.

Exports, at 1 million tonnes in sugar season 2025, can comfortably continue at similar levels in 2026 with high sugar output and opening inventory of 2 months of consumption.

“Sugar inventory levels at the end of fiscal 2026 are expected to remain at levels similar to last year, limiting the rise in working capital debt despite higher distillery operations,” said Poonam Upadhyay, Director, Crisil Ratings.

For the upcoming season, key watchpoints for the sector include temporal and spatial distribution of monsoon, its impact on cane yield, timely ethanol price revisions and clarity on export policy amid global sugar price movements, according to the report.

(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)