India’s sugar industry is expected to witness moderate revenue growth in the upcoming financial year, supported primarily by improved sugarcane availability and stable domestic sugar prices. According to a recent industry assessment, integrated sugar mills are projected to report 5–8% revenue growth in FY26.

The outlook comes from a report by the credit rating agency ICRA Limited, which analysed operational and financial trends across the sugar sector.

While revenue growth appears steady, the report highlights that profit margins may remain broadly stable due to rising sugarcane procurement costs and relatively stagnant ethanol prices.

Revenue Growth Outlook for Sugar Mills in FY26

According to the report by ICRA Limited, integrated sugar mills in India are expected to see moderate revenue expansion between 5% and 8% during FY26.

This projected growth will be driven by several key factors:

• Improved sugarcane availability

• Stable domestic sugar prices

• Strong ethanol blending demand

• Improving balance sheets of sugar mills

Higher availability of sugarcane ensures that mills can operate at higher crushing capacity, leading to increased sugar output and improved utilisation of distillery assets.

However, despite this revenue growth, the sector may not see a significant improvement in profitability.

Margins Likely to Remain Stable

Operating margins for integrated sugar mills are expected to remain range-bound at around 10–10.5% in FY26, compared to 9.6% in the previous financial year.

This modest improvement indicates that while revenue may grow, cost pressures will continue to impact profitability.

The key reason behind this margin pressure is the increase in sugarcane prices paid to farmers.

Increase in Sugarcane FRP

For Sugar Year 2026, the government has increased the Fair and Remunerative Price (FRP) of sugarcane.

The FRP has been raised by ₹15 to ₹355 per quintal, applicable for a basic sugar recovery rate of 10.25%.

While the higher FRP benefits farmers, it also raises the input costs for sugar mills, which limits margin expansion.

Ethanol Prices Remain Largely Unchanged

Another important factor affecting margins is the limited growth in ethanol prices.

Many integrated sugar mills have diversified into ethanol production as part of India’s ethanol blending programme. However, ethanol prices have remained largely stagnant, restricting the potential profitability boost from distillery operations.

Despite this, ethanol continues to play an important role in stabilising revenues for sugar mills by providing an additional income stream beyond sugar sales.

Improvement in Capital Structure

The report also highlights that the financial position of sugar mills is likely to improve in FY26.

Borrowings across the sector are expected to moderate, supported by:

• Profit accretion from operations

• Repayment of distillery loans

• Better cash flow management

This improvement will help sugar mills maintain comfortable capital structures and strengthen their financial coverage ratios.

Global Sugar Market Outlook

The international sugar market currently faces surplus supply conditions, which have pushed global sugar prices lower.

The report notes that international sugar prices during Sugar Year 2026 (October to September) remain below the cost of production and domestic prices in India.

One of the main reasons behind this surplus is the increased sugar output from Brazil, the world’s largest sugar producer.

Global Production vs Consumption

Global sugar production for SY2025–SY2026 is estimated to reach:

• 189.3 million metric tonnes of production, representing a 5% increase year-on-year.

Meanwhile, global consumption is expected to reach:

• 178.1 million metric tonnes, reflecting about 1% growth compared to the previous year.

This imbalance between supply and demand has contributed to lower international sugar prices.

Domestic Sugar Demand Remains Strong

Despite the global surplus, the domestic sugar market in India remains balanced and stable.

The report indicates that India’s demand-supply dynamics are comfortable, which supports stable sugar prices in the local market.

Domestic consumption remains robust due to strong demand from:

• Food processing industries

• Beverage manufacturers

• Confectionery sector

• Household consumption

This steady demand helps maintain stable revenue streams for sugar mills.

Sugar Production Outlook for India

India’s sugar production is expected to witness a significant increase in Sugar Year 2026.

According to the Indian Sugar Mills Association, the country’s gross sugar production is projected to rise by 9.4%.

Production is expected to reach 32.41 million metric tonnes, compared with 29.6 million metric tonnes in the previous year.

The increase is mainly attributed to better sugarcane crop availability and improved recovery rates.

Ethanol Diversion from Sugar Production

India’s ethanol blending programme continues to influence the sugar industry’s production dynamics.

A significant portion of sugarcane is diverted toward ethanol production, which reduces the amount of sugar entering the market.

For SY2026, the report estimates that around 3.1 million metric tonnes of sugar equivalent will be diverted toward ethanol production.

After accounting for this diversion, net sugar production is expected to be around 29.3 million metric tonnes.

This diversion strategy helps the government maintain a balanced sugar supply in the domestic market.

India’s Ethanol Blending Progress

India has made substantial progress toward its ethanol blending targets in recent years.

During the first three months of Ethanol Supply Year 2026, the country achieved a blending ratio of 19.98%.

A total of 239 crore litres of ethanol were blended with petrol during this period.

Out of this, 59.2 crore litres were blended in January 2026 alone, indicating strong momentum in the ethanol programme.

The ethanol blending initiative plays a critical role in:

• Reducing India’s crude oil imports

• Supporting farmers by increasing demand for sugarcane

• Improving the financial stability of sugar mills

Sugar Stocks and Consumption Outlook

India’s sugar stock levels are also expected to remain comfortable in SY2026.

According to the projections:

• Domestic sugar consumption is expected to reach 28.3 million metric tonnes.

• Exports are estimated at 0.7 million metric tonnes.

Based on these numbers, the country’s closing sugar stock is expected to reach 5.6 million metric tonnes.

This level of inventory represents approximately two months of domestic consumption, which is considered a healthy level for maintaining market stability.

Balanced Outlook for the Sugar Industry

Overall, the outlook for India’s sugar sector appears stable but not overly bullish.

The industry is expected to benefit from:

• Improved sugarcane availability

• Strong ethanol blending demand

• Stable domestic sugar prices

• Better financial discipline among mills

However, challenges remain in the form of higher sugarcane procurement costs and stagnant ethanol prices, which are likely to keep operating margins under pressure.

Conclusion

The latest industry assessment by ICRA Limited suggests that integrated sugar mills in India are positioned for moderate growth in FY26, with revenues expected to rise 5–8% year-on-year.

Improved cane supply and stable domestic prices will support this growth, while increased sugarcane procurement costs may limit margin expansion.

At the same time, continued progress in India’s ethanol blending programme and rising sugar production are expected to maintain a balanced domestic market environment.

As the industry navigates evolving market dynamics, the coming year will be crucial in determining how effectively sugar mills can balance rising costs with expanding revenue opportunities.

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