India's sugar production rose to 8.45 lakh tonnes in October 2026, a sharp increase from 1 lakh tonnes last year. While production volume is robust, investors remain cautious due to the government's decision to ban sugar-to-ethanol diversion, which could limit profit margins for mills this season.
India’s sugar production for the 2026-27 season has started with a significant volume jump, reaching 8.45 lakh tonnes in October. This is a dramatic increase from the 1 lakh tonnes recorded during the same period last year. The surge is primarily attributed to early crushing operations in Maharashtra, where 123 mills commenced work, contributing 7.20 lakh tonnes to the national total. Nationwide, 152 mills were active by the end of October, compared to just 31 mills at the same time in 2025.
While the rise in production indicates a strong supply position, the industry faces a major shift in its revenue model. For the 2026-27 ethanol supply year, the government has directed that no sugarcane juice, sugar syrup, or B-heavy molasses can be diverted for ethanol production. In previous seasons, many sugar mills boosted their profit margins by converting a portion of their sugar output into ethanol, which offered better financial returns. The new 'zero diversion' policy removes this high-margin revenue stream, creating potential pressure on the bottom line for many sugar manufacturers.
Investors are also tracking the efficiency of the current crushing season. Early reports indicate that the average sugar recovery rate—the amount of sugar extracted from sugarcane—is approximately 8.01 percent, which is lower than the 8.44 percent recorded in the previous season. A lower recovery rate means mills get less sugar from the same quantity of cane, which can increase the cost of production relative to the final output.
The government continues to regulate the market to ensure domestic price stability, with a quota of 13 lakh tonnes allocated for the first half of November. This follows the industry's adjustment to the end of the Advance Licence Scheme, which ended on October 31, moving the market toward domestic-only supply. With the Fair and Remunerative Price (FRP) set at ₹365 per quintal, mills face fixed raw material costs.
Looking ahead, the key factor for investors will be whether domestic sugar prices remain strong enough to compensate for the lost revenue from ethanol diversion. Market participants will likely watch for future earnings reports to see if the higher volume of sugar produced can offset the loss of ethanol-based profit, or if the increased supply combined with lower margins will impact the financial health of the sector.