India's Sugar Production Surges 25% in SSY26, But Ethanol Demand Stalls

ISMA data shows that all-India sugar production stood at around 12.0 million metric tonnes (MMT) as of December 31, 2025, registering a growth of nearly 25 per cent compared to 9.5 MMT produced during the corresponding period last year.

The improvement has been supported by a higher number of operating sugar mills, with 504 factories currently in operation versus 492 mills at the same point last season.

State-wise data indicates that Maharashtra led the recovery, with production rising sharply to 4.86 MMT from 3.0 MMT, driven by better cane availability and recovery levels. Uttar Pradesh remained stable, while Karnataka reported healthy growth, underpinning the sector's strong overall trajectory.

However, the report flags mounting challenges in the ethanol segment, particularly on the demand and export fronts.

Ethanol demand in India has "largely plateaued at approx. 1,200 crore litres," despite the industry having built significantly higher production capacity of about 1,500 crore litres over the past few years. Feedstock costs, mainly sugarcane and maize, which together account for over 70 per cent of ethanol production costs, remain structurally high.

As a result, the report notes that "Indian ethanol producers are largely uncompetitive in global export markets, particularly against low-cost producers in countries such as Brazil and the US."

Encouraged by consistent policy assurances under the Ethanol Blending Programme, producers had undertaken aggressive capacity expansion across grain- and molasses-based distilleries nationwide.

While this expansion has strengthened India's long-term supply readiness, the combination of a demand plateau and limited export viability has resulted in sub-optimal capacity utilisation.

The report said, "India's long-term supply readiness, the current demand plateau and limited export viability have resulted in sub-optimal capacity utilisation, increasing sensitivity to policy continuity and domestic offtake growth."

Overall, the sugar sector is benefiting from improved production dynamics in SSY26, supported by higher factory participation and better state-wise performance. At the same time, the evolving ethanol landscape highlights the growing importance of sustained domestic demand growth and policy stability to ensure efficient utilisation of expanded capacities and long-term sectoral stability.

- ANI