Sugar production falls to 30.6 MT, Monarch PMS flags policy, ethanol risks
Sugar production falls to 30.6 MT, ex-mill prices down over 30%; Monarch PMS flags policy, ethanol risks
Production shortfall and global deficit have tightened the sugar market, but government intervention has sharply corrected prices, shifting the focus towards costs, ethanol economics and balance-sheet strength, says Monarch PMS.
15th September 2026: India’s sugar market has moved into a more complicated phase, with lower-than-expected production tightening near-term supplies even as government intervention has triggered a sharp correction in prices, according to Monarch PMS.
Sugar production for 2025/26 is currently estimated at 30.6 million tonnes (MT), against an earlier estimate of 34.3 MT, impacted by pest disease and waterlogging. Mills are entering October with around 3 to 3.5 MT of inventory against monthly consumption of nearly 2.2 MT—tight, but not indicative of a shortage.
Supply concern reflected in prices
Retail sugar prices in Delhi rose over 25% in August alone to Rs 64/kg (as of August 30), up 42% year-on-year. Both retail and ex-mill prices have since eased further — the Department of Food & Public Distribution reported a roughly 5% retail pullback by September 3 as the ex-mill correction fed through, and prices continued softening through the second week of September.
The government subsequently announced duty-free imports of 1 MT by October 31, stock limits for dealers and bulk consumers, an earlier crushing season around October 15 and fortnightly release quotas from September. The measures have brought ex-mill prices down nearly 30% to around Rs 47/kg from a peak of Rs 67/kg. Since then, mill-gate quotes have fallen further and diverged by state: ChiniMandi's September 10 daily update put Maharashtra at around Rs 45–46/kg against Rs 49–53/kg in Karnataka, Gujarat, Tamil Nadu and Punjab, with the DFPD citing a nearly 20% ex-mill correction from peak. Two related developments are worth flagging: only around 260,000 tonnes of the sanctioned 1 MT duty-free import quota had actually been committed as of September 9, as the domestic price fall reduced the commercial case for further imports; and Maharashtra's October 15 crushing start has drawn fresh farmer opposition, a watch-point for the pace of fresh supply.
Cost pressures remain a key variable
The Fair and Remunerative Price (FRP) for 2026/27 stands at Rs 365/quintal, up 2.81%. With cane accounting for roughly three-fourths of costs, every Rs 10 increase in cane prices adds approximately Rs1/kg to costs. State-advised prices in Uttar Pradesh remain a key concern.
Ethanol economics have also shifted. At Rs 57.97/litre for C-heavy, Rs 60.73 for B-heavy and Rs 65.61 for juice, sugar at around Rs 45–53/kg (the current ex-mill range) makes sugar production more attractive. Diversion has consequently declined from 12% in 2022/23 to 9%. Industry bodies (ISMA, AIDA) note these ethanol prices remain unrevised since the 2022/23 supply year despite the FRP increases, and expect diversion to fall further in ESY 2026/27 if rates are not revised.
“Investors should buy companies with low leverage, a real distillery mix and those generating cash, not headlines,” Dhruv Joglekar, Assistant Fund Manager – Monarch PMS said. Policy reversal, import arrivals, monsoon conditions, an unchanged Rs 31/kg MSP (though under renewed pressure — Maharashtra's state government sought a hike to Rs 41/kg in August 2026) and working-capital strain are key factors to watch.
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