India’s rising sugar prices may significantly impact ethanol production, as sugar mills are expected to prioritize sugar manufacturing over ethanol due to better profitability. Tight sugar supplies, lower production, uneven rainfall in key growing regions, and rising demand ahead of the festive season have pushed sugar prices higher, making sugar sales more attractive than diverting sugarcane or sugar for ethanol production.
Retail sugar prices have increased to ₹48–50 per kg, while wholesale prices have climbed to ₹4,750–4,800 per quintal due to limited availability. At the end of June, ex-factory prices of S-grade sugar in Maharashtra and Karnataka were around ₹3,850 per quintal, but prices have continued to strengthen. Industry experts believe sugar prices are likely to remain firm until the beginning of the new sugar season, reducing the incentive for mills to divert sugar for ethanol production.
Sugar prices are expected to rise further during the upcoming festive season, increasing costs for consumers and limiting the government's ability to release additional sugar into the market. To control prices and prevent hoarding, the government has imposed stock limits effective August 1, 2026, under which sugar dealers cannot hold stocks for more than 30 days or exceed 4,000 quintals at any single location. The restrictions will remain in force until November 30, 2026, and strict action will be taken against violators.
According to All India Distillers’ Association (AIDA) President Vijendra Singh, ethanol production has become less profitable because ethanol procurement prices have remained unchanged since 2022-23, while sugarcane prices have increased by nearly 16 percent during the same period. With sugar prices rising and sugar stocks remaining low, mills are expected to earn better returns by producing sugar instead of ethanol.
Industry experts believe sugar diversion for ethanol during the 2026-27 ethanol supply year could decline sharply. If current sugarcane, sugar, and ethanol prices continue, mills may stop producing ethanol from cane juice and B-heavy molasses, limiting production mainly to C-heavy molasses, which yields lower ethanol volumes. This could slow India's ethanol blending programme unless ethanol procurement prices are revised.
The ethanol industry has urged the government to increase ethanol prices to restore the economic viability of ethanol production. Vijendra Singh said India’s sugar industry normally diverts 2.5–3.5 million tonnes of sugar annually for ethanol production. If this diversion reduces significantly, additional sugar may enter the domestic market over the long term, putting pressure on prices once production recovers. He emphasized that the policy of converting surplus sugar into ethanol has benefited sugar mills, sugarcane farmers, and the country's energy security.
Meanwhile, the Indian Sugar and Bio-energy Manufacturers Association (ISMA) estimates India’s sugar production for the 2025-26 crushing season at around 27.9 million tonnes, compared with domestic consumption of about 28.5 million tonnes. This marks the second consecutive year in which sugar production is expected to remain below consumption. The industry had initially projected production at 30.9 million tonnes, but weaker sugarcane crops in Uttar Pradesh and Maharashtra resulted in a much lower output.
India’s sugar stocks are also expected to remain critically low. The country began the current sugar season on October 1, 2025, with opening stocks of approximately 4.7 million tonnes. With total sugar availability estimated at 32.6 million tonnes, domestic consumption of 28.5 million tonnes, and exports of around 0.8 million tonnes, opening stocks for October 1, 2026, are projected to decline to just 3.3–3.5 million tonnes—one of the lowest levels recorded in recent years. The tightening supply outlook is expected to keep sugar prices firm while posing fresh challenges for India's ethanol blending programme.
