India’s sugar sector is gaining strength through higher sugarcane production, ethanol diversification, rising exports and improved farmer payments despite recent price pressures.
India’s sugar sector is strengthening as higher sugarcane production, ethanol diversification, rising exports and improved farmer payments reshape the industry. Despite a recent price increase, the government says the movement reflects short-term supply and market pressures rather than shortage.
India is the world’s second-largest sugarcane producer, supporting nearly 5 crore farmers and around 5 lakh workers in sugar factories. Sugarcane production reached 500 million tonnes in 2025-26, according to the Third Advance Estimate of the Ministry of Agriculture and Farmers Welfare, up 43.5 per cent from 348.44 million tonnes in 2015-16.
Sugarcane cultivation has expanded from 49.27 lakh hectares in 2015-16 to 58.87 lakh hectares in 2025-26, with Uttar Pradesh and Maharashtra remaining the leading producing states.
India’s growing production base has supported its global sugar trade. Exports increased to 8 lakh MT in 2025-26, compared with 0.47 lakh MT in 2016-17, with Sri Lanka, West Asia and East Africa among major destinations.
Farmer support has also strengthened. The Fair and Remunerative Price for sugarcane for the 2026-27 season has been fixed at ₹365 per quintal, based on a basic recovery rate of 10.25 per cent. This is ₹135 higher than the ₹230 per quintal fixed for 2016-17.
Ethanol Diversification Strengthens Sugar Mills
Ethanol diversification has become an important pillar of the sugar economy. The ethanol-blending programme aims to improve energy security, reduce fossil-fuel dependence, provide farmers with additional income and lower greenhouse gas emissions.
Sugar diversion towards ethanol has declined from around 12 per cent in 2022-23 to about 9 per cent in 2025-26. Nearly three-fourths of India’s ethanol now comes from grains, particularly maize, making the programme diversified.
Ethanol has also helped address a structural challenge for sugar mills. India generally produces around 300-340 lakh MT of sugar annually, while domestic consumption is approximately 280-290 lakh MT. Surplus stocks can lock up working capital and delay farmer payments. Diverting surplus to ethanol can ease this pressure.
As of August 20, 2026, 97 per cent of sugarcane dues for the 2025-26 season had been paid.
Recent Sugar Price Rise Linked to Short-Term Pressures
Retail sugar prices have recently risen from ₹48.18 per kg on July 20 to ₹55.70 per kg on August 20, an increase of about 15.6 per cent. The government attributes it to lower production, festive demand, weather-related crop damage, tighter global supplies, international prices, speculation and hoarding.
Current sugar production is estimated at around 306 lakh MT, below the initial estimate of 343 lakh MT. Red Rot, Top Borer disease and waterlogging caused by excess rainfall have affected output. Sufficient stocks are available to meet domestic demand until the new crushing season begins in October.
Global markets are also facing tighter supplies. Global sugar deficit is estimated at around 33 lakh MT for 2026-27, while international prices rose from $474 per tonne on June 30 to $552 on August 20.
Government Steps to Stabilise Supplies
To stabilise supplies, the government has imposed a 400-tonne stock limit on sugar dealers from August 1 to November 30. From September 1, bulk consumers will be restricted to stocks equivalent to 15 days of consumption. Officials are conducting physical verification of sugar stocks.
The government has permitted duty-free imports of 10 lakh MT of raw sugar and advised states and mills to begin crushing from October 15. Early crushing could increase October production from usual 3-4 lakh MT to more than 10 lakh MT.
A Diversifying Agricultural-Industrial Sector
Overall, India’s sugar sector is evolving beyond conventional sugar production. Stronger cane output, farmer payments, exports and ethanol diversification are creating an agricultural-industrial ecosystem. While price pressures remain, policy measures and improving mill finances indicate a sector contributing to farmer incomes, energy security, supply stability and global trade.
