Production Estimates
Crisil sees 2025-26 sugar output up 15%, but only modest growth for mills
This story was originally published at 14:54 IST on 27 June 2025
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NEW DELHI – A 15% on-year rise in sugar output projected for the 2025-26 season (Oct-Sept) notwithstanding, Indian sugar mills are likely to see only a modest improvement in profitability due to stagnant ethanol prices, high sugarcane costs, and export curbs, Crisil Ratings said Friday.
India's gross sugar production is expected to rise to 35 million tonnes in the sugar season starting October, backed by an above-average monsoon that will lift cane acreage and yields in key producing states, the report said. Yet, the operating margin of mills is seen inching up only to 9.0%-9.5% in 2025-26 (Apr-Mar), from 8.7%-9.0% a year ago, which had already seen a 200 basis points decline in profitability.
"The strategic diversification to ethanol was intended to de-risk earnings and cash flows of sugar mills. But rising cane costs and stagnant ethanol procurement prices have limited improvement in profitability," Anuj Sethi, senior director, Crisil Ratings, said in the report.
The fair and remunerative price for sugarcane has been increased by 4.5% to INR 355 per 100 kilogram for the upcoming season. Although mills are expected to divert around 4 million tonnes of sugar for ethanol production--up from 3.5 million tonnes this season--the current ethanol pricing offers little margin growth. Integrated mills with distilleries and cogeneration facilities may see a modest 40-60 basis points margin gain, Crisil said. However, standalone mills without such diversification may continue to face profitability pressure, he added.
On the pricing front, domestic sugar prices have remained steady at INR 35-38 per kg this season and are expected to remain
range-bound next year as well, capping any significant upside for millers. The report noted that with higher output and a comfortable opening inventory, India can maintain sugar exports at around 1 million tonnes in 2025-26, depending on government policy. Inventory levels at the end of FY26 are expected to be similar to last year, keeping working capital requirements in check.
"Overall debt levels of integrated players are expected to remain under control, with capital spends limited to routine modernisation," Poonam Upadhyay, director, Crisil Ratings, said. This, along with a modest improvement in profitability, should lift interest coverage to about 3.0 times in FY26 from 2.7 times in FY25, she added.
Crisil said the key factors to watch in the months ahead will be the spatial and temporal progress of the monsoon, timely revisions in ethanol prices, and clarity on the government's export policy amid global market movements. End
Reported by Afra Abubacker
Edited by Subhojit Sarkar
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