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Informist, Monday, Nov. 2, 2026

By Afra Abubacker

NEW DELHI – India's sugar production is likely to decline by a sharp 12% on year in the 2026-27 (Oct-Sept) season due to poor rainfall and may even fall short of domestic consumption demand, said Uppal Shah, co-founder and chief executive officer of ChiniMandi.com. Maharashtra may witness the sharpest decline, with sugar output likely to fall around 20% on year, while production in Uttar Pradesh may remain largely flat, Shah added. 

"The drought has left sugarcane crop short of both height and weight...I expect a shorter, leaner season, with a deficit (around 1.5 million tonnes) against consumption of about 28.5 million tonnes...a deficit is inevitable", Shah, who is also the chairman and managing director of JK India eAgriTech Ltd said in an e-mail interview with Informist. 

Last year, mills could have produced 30.6 million tonnes of sugar if all sugarcane or sucrose had been used to produce sugar and not ethanol. However, there was no such restriction, and distilleries diverted nearly 3 million tonnes of sugar for ethanol production. "With zero diversion (allowed) this year, gross and net are nearly the same. So the real fall in sugar output is larger than the headline suggests, close to 12% at the gross level," Shah said.

To improve domestic availability, the government has allowed duty-free imports of raw sugar till December-end. However, elevated global sugar prices have made imports expensive. "In hindsight, an earlier window would have bought cheaper sugar...But the bigger issue is the design, not the date," Shah said, adding the government must also allow imports of white sugar along with raw sugar.

Sugar prices may rise if festival demand is strong, but may ease as fresh arrivals pick up pace in December. "But the floor will stay high, because production is lower and the closing stock will be thin," he said. To control sugar prices, the government has undertaken several measures such as stock limits for traders and fortnightly sales quotas for sugar mills. "It does not create sugar, but it keeps the sugar we have moving, and in a deficit year, flow matters as much as stock," Shah said.

Below are the edited excerpts from the interview: 

Q. India has entered the sugar season 2026-27 (Oct-Sep) with many challenges. What will remain the biggest pain point for sugar mills through this year? Will it be yield losses and lower sugar recovery, or operational hurdles like farmers' protests and government restrictions?

A. The biggest pain point is the cane itself. Protests and restrictions are real, but they are problems of timing, which can be solved at a meeting table. Lost yield and lost recovery cannot be made up later in the season. The drought has left sugarcane crop short of both height and weight. West Indian Sugar Mills Association expects Maharashtra's production to fall about 20% to nearly 8 million tonnes, with tonnage per acre down 30-40%. 

On top of that, we started crushing early, and Maharashtra's average recovery was only 7.04% as of Oct. 25. Every point of recovery lost is sugar the country loses for the whole season, and it lands directly on the mill. This year there is also no ethanol income from sugarcane juice or B-heavy molasses to cushion cash flow. So I feel the real pain point is liquidity: less sugar per tonne, a fixed sugarcane price, and one revenue stream switched off.

I expect sugarcane crushing to reach full pace only after Diwali...from mid-November. That is also when cane in Maharashtra naturally matures. Uttar Pradesh is expected to reach full pace only after Nov. 10. North Karnataka has not started, as farmers' agitation continues. Farmers' grievances are genuine. West Indian Sugar Mills Association estimates that crushing immature cane in Maharashtra between Oct. 15-Nov. 15 could lower recovery by 1% to 1.5%. That is a loss of INR 450-INR 500 per tonne for mills, while farmers lose INR 300-INR 350 per tonne because immature cane weighs 10-12% less. For Karnataka and Uttar Pradesh, it is too early to put a number, since crushing has barely begun.

Q. What is your outlook for sugar production in 2026-27 (Oct-Sep)? How much decline is the market expecting in output across the country?

A. I expect a shorter, leaner season, with a deficit against domestic demand. AgriMandi.live estimates 2026-27 sugar production at about 27 million tonnes: roughly 9.4 million tonnes from Uttar Pradesh, 9 million from Maharashtra, 4.8 million from Karnataka, and 3.8 million from the rest of the country. Against consumption of about 28.5 million tonnes, a deficit is inevitable. Last season, net sugar production after ethanol diversion was about 28 million tonnes, and gross sugar output about 30.6 million tonnes. With zero diversion this year, gross and net are nearly the same. So the real fall in cane sugar output is larger than the headline suggests--close to 12% at the gross level.

Maharashtra is where the decline is seen the sharpest. West Indian Sugar Mills Association is more conservative than AgriMandi.live at about 8 million tonnes, around 20% lower than last season. Uttar Pradesh should hold close to last year. Karnataka is estimated near last year's level, but that depends on how soon the agitation ends and crushing begins. These numbers remain subject to rain conditions, sugarcane yield, and sugar recovery. In a balance this tight, even a small change in production creates a proportionally bigger problem.

Q. Do you think the government was late in opening imports on Aug. 20, instead of allowing it earlier in July? Do you think the government should also allow imports of white sugar?

A. I will be honest. In July, I, too, believed the closing stock was enough to carry us into the new season, and I argued for better supply management first: a weekly release quota with compulsory dispatch. In hindsight, an earlier window would have bought cheaper sugar. International prices rose from about $474 per tonne on 30 June to $552 by Aug. 20, more than 16%. But the bigger issue is the design, not the date. The window allowed only raw sugar, and only refiners with their own refining capacity. With global prices firm, the disparity did not work for most of them. The extension to 31 December adds time, but it does not fix the parity.

Yes, I firmly believe the government should open white sugar imports, at least 3-4 million tonnes, to keep a healthy stock through the season. Domestic prices are now within 10-12% of import parity. West Asia, North Africa, China and Southeast Asia will all be buyers, and a weaker rupee adds to our landed cost. Buying early, at a known parity, is insurance; buying late is a scramble. 

Q. Of the 1-million-tonne import quota, how much sugar is estimated to have reached India so far? How would you describe the pace of shipments, and what were the challenges in contracting import orders?

A. The raw sugar route has helped at the margin, but it has not delivered the volume the situation needs. Industry data shows around 260,000 tonnes imported so far, about a quarter of the quota. My own sense from the trade is that only 200,000-300,000 tonnes, possibly less, have actually reached the domestic market as refined sugar. The pace has been slow, and the reasons are commercial, not logistical.

There are eligibility and parity issues. Only mills and refiners with their own refining capacity can import, which narrows the field to a few port-based refineries. Only mills and refiners with their own refining capacity can import, which narrows the field to a few port-based refineries. Raw sugar rallied on weather concerns in Brazil and India, and the rupee weakened to around 95 to the dollar, so landed cost stayed above domestic prices for most of the window. In addition, more than 200,000 tonnes of the quota was still unallocated after the first round, and the deadline to surrender unused quota has now been extended to Nov. 15.

Q. How do you view the government's restriction on sugar diversion towards ethanol production for the upcoming year, particularly when the restriction was announced even before major industry bodies released their sugar production forecasts for the 2026-27 season?

A. Given the sugar stock position, I believe it was a prudent call. Household sugar has to come first. On timing, the government did not need a production forecast to see the risk. The sugar season opened in October with stocks of about 360,000-370,000 tonnes, the lowest in more than a decade and barely enough to meet six to seven weeks of consumption. Ethanol supply year 2026-27 began on Nov. 1, so the tender from oil marketing companies had to go out with a clear feedstock policy. A late decision would have been worse for everyone. We saw that in December 2023, when the rules changed mid-season after mills had already planned their diversion. That said, we should be clear-eyed about the cost.

The industry built large distillation capacity on the strength of the ethanol programme, much of it with debt, and idle capacity still carries interest. The restriction is for one year, and I would request two things: an interest subvention scheme for stressed sugar-based distilleries, and a mid-season review once actual production is visible. If crushing surprises on the upside, a calibrated quantity of B-heavy diversion could be considered.

Q. How much ethanol is likely to be produced from C-heavy molasses in the coming ethanol supply year? Will mills have more C-heavy feedstock availability this year due to increased sugar production from cane juice, syrup, and B-heavy molasses?

A. Yes, mills will generate more final molasses per tonne this year. With no cane juice, syrup, or B-heavy diversion for ethanol production, every tonne of cane goes through the full sugar route, and its molasses comes out as C-heavy. Hoowever, an El Nino-linked drought means a smaller crop and a shorter season, which will offset part of that gain. Maharashtra's crushing season may run about 90 days, against 104 last year.

Price is the other limit. The oil marketing company tender has priced C-heavy ethanol at INR 57.97 per litre, the lowest rate on offer and unchanged from last year. Industry bodies have asked for INR 62.23. With potable alcohol demand firm, not all C-heavy will come to oil marketing companies. At approximately 275 million tonnes of cane crushed, industry estimates suggest C-heavy molasses could theoretically support about 2.74 billion litres of ethanol. A realistic figure is less than 2.00 billion litres, because the same molasses is also used for rectified spirit, extra-neutral alcohol for potable use and cattle feed.

Q. How did distilleries exceed their ethanol supply orders in the current ethanol supply year ending October? Does this mean mills were more interested in producing ethanol from B-heavy molasses than making sugar, despite sugar prices rallying in August?

A. First, the facts. Sugar-based feedstocks supplied 2.82 billion litres during Nov-Sept against an allocation of 2.89 billion litres, or 97.6%. The overshoot was limited to B-heavy molasses, at 1.15 billion litres supplied against an allocation of 1.11 billion litres. C-heavy based ethanol supply also exceeded supply at 160 million litres against an allocation of 120 million litres. Cane juice ethanol actually fell short, at 1.51 billion litres supplied against a 1.66 billion litres allocation.

Second, the timing. Allocations for ethanol supply year 2025-26 were made in October-November 2025, when the sugar season looked surplus, and the industry was seeking exports. Diversion decisions are made during crushing--between November and March. At that time, ex-mill sugar was close to the cost of production, and ethanol production had assured offtake from oil companies.

The sugar rally came in July and August, after crushing had ended. By then, the sugarcane was crushed, and the molasses was already in the tanks. As I understand it, the small excess was accepted while grain-based supplies were running at only 77.6% of allocation. So I would not read this as mills preferring ethanol over sugar. A mill's first priority is to recover its cane cost, and when sugar pays better, sugar gets priority. As I wrote in September, if sugar stays above INR 42 per kg, the incentive to divert towards ethanol weakens. (Currently, sugar prices are trading above INR 50 per kg, and in August it had hit record levels of INR 65 in some markets)

Q. The government has recently introduced sales quotas on a fortnightly basis to ensure mills liquidate stocks throughout the month. How efficient is this system in improving supply and stabilising prices? Considering that demand for sugar is not evenly spread out in a month, how does it actually fare with the earlier monthly sales quota system? 

A. Under the monthly system, a mill could hold its quota until the last week and wait for a better price. Now mills must sell and lift at least 45% of each fortnightly quota in the first week, physical verification has been intensified, and shortfalls can attract action under the Essential Commodities Act. Sugar on paper has become sugar on trucks.

You are right that demand is not evenly spread. Festive buying is lumpy, and a fortnightly window can leave a mill with an unsold balance in a slow week or a buyer short in a busy one. The government has eased this sensibly by allowing sugar produced in October to be sold in October and November, over and above the quota. Is it better than the monthly system? For a tight season, yes. It does not create sugar, but it keeps the sugar we have moving, and in a deficit year, flow matters as much as stock. Once production stabilises and stocks rebuild, a return to the monthly rhythm would be logical.

Q. Have stock limits on traders and bulk consumers dampened market sentiment, or has trade adjusted to the new norms? Do you think the government will continue with the fortnightly sales quota system throughout this year?

A. Having been in the sugar trade for nearly three decades, I can say the trade has adjusted, but sentiment has certainly been dampened. Traders are limited to 100 tonnes with a 15-day holding period from Oct. 15 to Nov. 30, and bulk consumers to 15 days of stock from Sept. 1. This curbs speculative holding, which was the intent. However, it also thins liquidity. Buyers come back in small lots, mills release small quantities and raise quotes the next day, and nobody is selling in force. On the fortnightly system, I expect the government to continue it at least through the early months of the season, until crushing in all three major states is at full pace and the production picture is clear.

Q. How do you review sugar price movement since August? Where do you see sugar prices heading in the next two to three months? 

A. Ex-mill prices peaked in August to around INR 6,800-INR 7,000 per 100 kg, with Uttar Pradesh M-grade touching INR 6,500-INR 6,800 per 100 kg; wholesale and destination prices in some centres went to INR 7,000-INR 7,500. Prices then eased to around INR 4,200-INR 4,300 in Maharashtra and INR 4,500-INR 4,600 in Uttar Pradesh by mid-October and have been climbing since. (On Thursday, prices in Maharashtra were around INR 5,100-5,400 per 100 kg and Uttar Pradesh were around INR 5,300 per 100 kg). 

The pattern is clear. July and August were driven by thin stocks and festive buying. The September correction came from higher releases, stock limits, and the import announcement. The October rebound reflects slow crushing and Diwali demand. For the next two to three months, I believe prices will stay firm until after Diwali. If festive buying arrives in strength, they could touch INR 5,500-INR 5,700 per 100 kg in Maharashtra and INR 5,700-INR 5,800 in Uttar Pradesh.

Domestic prices are within 10% of import parity, and that is where they are likely to find their ceiling. Once all three major states crush at full pace in late November and December, fresh arrivals should cool prices, but the floor will stay high, because production is lower and the closing stock will be thin. End

US$1 = INR 94.85

Edited by Deepshikha Bhardwaj

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