Quote on Ban on sugar diversion towards ethanol expected to support domestic availability amid expected tight inventory levels in SY2027 by Ankit Jain, ICRA Ltd
Below the Quote on Ban on sugar diversion towards ethanol expected to support domestic availability amid expected tight inventory levels in SY2027 by Ankit Jain, ICRA Ltd
"The recent restriction on sugar diversion towards ethanol is expected to ease supply pressures amid lower sugar availability. Net sugar production is projected at around 27.0-28.0 million metric tonnes (MT) in SY2027, with no diversion towards ethanol, compared with around 27.6 million MT in SY2026, after diversion of approximately 3.0 million MT towards ethanol. Given estimated domestic consumption of 28.3 million MT, closing inventory is likely to remain at around 3.5-4.5 million MT, compared with 4.8 million MT (factoring in permitted import quota of 1.0 million MT) in SY2026. This would be equivalent to less than two months of consumption, below the historical norm of two to three months. Average Uttar Pradesh ex-mill sugar prices increased by around 6% to Rs. 41.5/kg in SY2026 from Rs. 39.0/kg in SY2025 and are currently trending at Rs. 44-47/kg. The restriction on sugar diversion towards ethanol is expected to improve domestic sugar availability and moderate prices to some extent. The profitability of integrated sugar mills with only cane-based distilleries is expected to moderate following the restriction, although prevailing sugar realisations are likely to partly cushion the impact. In contrast, the impact on mills with multi-feed distilleries is expected to remain limited, supported by their ability to switch to alternative feedstocks for ethanol production."
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