Despite improved national output, mounting cane arrears and underutilised distillery capacities weigh on the sector’s financial health

India’s sugar production for the 2025–26 sugar season reached 275.28 lakh tons as of April 30, 2026, marking an increase of nearly 7 per cent compared to 256.49 lakh tons produced during the corresponding period last year. The increase comes despite the near-completion of crushing operations across the country, with only five sugar mills currently operational compared to 19 mills operating at the same time last season.

The latest industry data shows a mixed regional performance, with Maharashtra and Karnataka posting strong year-on-year growth, while Uttar Pradesh recorded a marginal decline in output.

Uttar Pradesh Ends Season with Lower Production

Uttar Pradesh, the country’s largest sugar-producing state, recorded sugar production of 89.65 lakh tons, lower than 92.40 lakh tons produced during the same period last year. All 121 sugar mills in the state have concluded crushing operations for the season, compared to 10 mills that were still operational on the corresponding date in 2025.

Maharashtra and Karnataka Lead Growth

Maharashtra produced 99.20 lakh tons of sugar this season, significantly higher than last year’s 80.93 lakh tons. Similarly, Karnataka reported production of 48.01 lakh tons, compared with 40.40 lakh tons during the same period last year.

Crushing operations for the main season have concluded in both Maharashtra and Karnataka. However, select mills in Karnataka are expected to resume operations during the special season beginning June–July 2026.

Tamil Nadu also continues to operate five mills as part of the extended special season. Historically, special season operations in Karnataka and Tamil Nadu together contribute around 5 lakh tons of additional sugar production.

State-Wise Sugar Production Snapshot

Across the country, a total of 539 sugar factories commenced operations during the 2025–26 season, of which 534 have concluded crushing operations, leaving only five mills operational as of April 30, 2026. In Uttar Pradesh, all 121 factories that started operations have closed for the season, producing 89.65 lakh tons of sugar compared with 92.40 lakh tons during the corresponding period last year.

Maharashtra witnessed strong growth, with all 210 operational factories completing the season and producing 99.20 lakh tons of sugar, significantly higher than last year’s 80.93 lakh tons. Karnataka also recorded improved performance, with 81 factories completing operations and sugar output rising to 48.01 lakh tons from 40.40 lakh tons a year earlier.

In Gujarat, all 14 factories have closed operations after producing 7.20 lakh tons, lower than 8.92 lakh tons recorded during the same period last year. Tamil Nadu remains the only major state with ongoing crushing activity, where five of the 30 factories that started operations continue to run under the special season, contributing to total production of 5.38 lakh tons compared with 4.76 lakh tons last year.

Other states together produced 25.84 lakh tons of sugar this season, compared to 29.08 lakh tons during the corresponding period last year.

At the national level, India’s total sugar production stood at 275.28 lakh tons as of April 30, 2026, against 256.49 lakh tons during the same period last season.

( Note: Sugar production figures are after diversion of sugar into ethanol )

Industry Seeks Urgent Revision in Sugar MSP

As the sugar season approaches closure, industry stakeholders have intensified calls for an early revision in the Minimum Selling Price (MSP) of sugar, citing mounting pressure on mill cash flows due to rising production costs and subdued ex-mill sugar realizations.

The financial strain has contributed to a sharp rise in cane payment arrears. In Maharashtra alone, cane arrears stood at Rs 2,130 crore as of mid-April 2026, significantly higher than Rs 752 crore recorded during the corresponding period last year.

Industry representatives argue that a timely upward revision in MSP, aligned with prevailing production costs, is critical to restoring financial viability, enabling timely cane payments to farmers, and maintaining domestic market stability — all without imposing any additional fiscal burden on the government.

Ethanol Push Gains Strategic Importance

The industry has also renewed its call for a more ambitious ethanol blending roadmap amid rising crude oil prices and evolving geopolitical uncertainties.

With India’s ethanol production capacity estimated at nearly 2,000 crore litres, including grain-based ethanol, stakeholders believe the country should move beyond the E20 blending target toward higher blends such as E22, E25, E27, and eventually E85/E100.

The industry has also advocated for faster deployment of flex-fuel vehicles (FFVs) and rationalisation of GST structures to encourage broader adoption and strengthen long-term ethanol demand.

Distillery Capacity Under Pressure

At the same time, industry executives have raised concerns over delays in revising ethanol procurement prices for sugarcane-based feedstocks and lower allocation volumes to the sector.

According to industry estimates, the mismatch between installed distillation capacity and domestic ethanol offtake has resulted in significant underutilisation of assets, increasing financial stress and weakening a key revenue stream for sugar mills.

Stakeholders have urged policymakers to implement a timely revision in ethanol prices to maintain feedstock parity, improve capacity utilisation, and provide long-term policy certainty for investors.

Policy Support Seen as Critical for Sector Stability

Industry leaders maintain that timely and calibrated policy interventions will be essential to strengthen mill finances, protect farmer interests, stabilise domestic sugar markets, and support India’s broader energy security objectives.

They argue that stronger policy alignment between the sugar and ethanol sectors will not only improve the sector’s financial sustainability but also reinforce rural economic growth and accelerate the country’s transition toward cleaner energy alternatives.