By R. Suryamurthy
If your sweet tooth has been easy on your pocket until now, brace yourself—sugar prices are expected to climb sharply in the first half of fiscal year 2026. A new report by India Ratings and Research (Ind-Ra) warns that India’s sugar reserves are heading toward critically low levels, spelling trouble for household budgets across the country.
Sugar Production Hits a Five-Year Low
The alarming forecast stems from a 15% year-on-year drop in sugar output for the 2024–25 sugar season (SS25). Production is estimated to fall to 29.0–29.5 million tonnes—its lowest in five years—mainly due to poor sugarcane yields, reduced sugar recovery, and the outbreak of Red Rot, a destructive plant disease.
As a result, India’s closing sugar stock is expected to dwindle to just 5.3–5.5 million tonnes, barely meeting the normative requirement of 5.5 million tonnes. This marks the country’s first sugar production deficit in nearly eight years.
“With sugar production at a five-year low, India’s inventory is likely to reduce to the normative level by the end of SS25,” said Khushbu Lakhotia, Director, Corporate Ratings, Ind-Ra. “Prices have already firmed up and are likely to remain elevated throughout the season.”
Ethanol Segment Under Pressure
Complicating the scenario further is the struggling ethanol segment, a crucial revenue stream for the sugar industry. Though the government has mandated a 4.4% increase in the Fair and Remunerative Price (FRP) for sugarcane in SS26, ethanol prices have not kept pace with input costs. This imbalance has tightened margins for sugar mills and could impact their future ability to maintain supply levels.
While India is likely to achieve its ambitious 20% ethanol blending target for vehicles ahead of schedule, less sugar is being diverted to ethanol due to the production slump. Interestingly, maize is now contributing a larger share to ethanol production—a shift that reflects broader changes in the fuel-ethanol ecosystem.
Outlook: Relief on the Horizon?
There is cautious optimism that a good monsoon in 2024 could help sugar production recover in the next season. But for now, consumers are likely to face higher prices at the retail level. Ind-Ra has suggested that blending targets could face future challenges such as feedstock availability and reduced fuel efficiency in vehicles.
In the meantime, households may want to start stocking up or consider alternative sweeteners—because sugar isn’t going to stay sweet on your wallet for long.
