India's sugar and ethanol sector is heading into another challenging year as structural problems in sugarcane cultivation continue to deepen. Industry estimates suggest that the country's net sugar production (after diversion for ethanol) during the 2026-27 sugar season may remain around 28-28.5 million tonnes, lower than the country's annual sugar consumption of 28.5-29 million tonnes.
According to industry sources, a weak southwest monsoon, declining sugarcane productivity and a growing shift of farmers towards alternative crops have significantly weakened production prospects for the coming season. If forecasts of below-normal rainfall materialize, the pressure on sugar output could extend into the 2027-28 sugar season as well.
Sugar stocks to hit decade-low
Industry sources told Rural Voice that India's closing sugar stock on October 1, 2026, at the end of the current 2025-26 sugar season, is expected to fall to around 3.5 million tonnes, the lowest level in nearly a decade. The stock would be sufficient for only about one and a half months of domestic consumption, whereas the industry generally considers a buffer equivalent to nearly three months' consumption as comfortable.
The tight supply situation has also prompted the government to suspend sugar exports until September 30, 2026.
Export policy under scrutiny
India's changing sugar production estimates have also raised serious questions over export policy.
The government had permitted the export of 1.5 million tonnes of sugar on November 7, 2025, followed by another 0.5 million tonnes on February 13, 2026, taking the total export quota to 2 million tonnes.
However, due to disruptions caused by the Iran conflict, only about 0.8 million tonnes of sugar could actually be exported this year. Had the entire permitted quantity been exported, India's closing sugar stocks would have fallen below one month's domestic consumption, potentially forcing the country to consider sugar imports during the current year itself.
Recognising the deteriorating production outlook, the Centre reversed its earlier policy and imposed a complete ban on sugar exports until September 30, 2026.
Production estimates prove overly optimistic
The current season has exposed significant gaps between initial production estimates and actual output.
At the beginning of the 2025-26 season, industry body ISMA had projected 30.95 million tonnes of net sugar production along with an estimated diversion of 3.4 million tonnes of sugar for ethanol, implying gross sugar production of 34.35 million tonnes.
The latest estimates, however, indicate that net sugar production during 2025-26 is likely to remain around 27.8 million tonnes, substantially below the initial forecast.
The optimistic production estimates had formed the basis for allowing sugar exports. The subsequent sharp downward revision ultimately forced the government to reverse course, highlighting weaknesses in production forecasting and policy planning.
Ethanol programme also under pressure
The slowdown in sugar production is also affecting India's ethanol blending programme.
Sugar diversion for ethanol production has declined from around 3.5 million tonnes during 2024-25 to approximately 2.9 million tonnes in 2025-26. While the government continues to push for ethanol blending levels beyond 20 per cent, lower sugarcane availability is emerging as a major constraint for the programme.
Outlook for 2026-27
Industry estimates suggest that India's gross sugar production in 2026-27 could be around 31 million tonnes. After diverting nearly 2.5 million tonnes of sugar for ethanol, net sugar production is expected to remain close to 28.5 million tonnes, barely matching domestic consumption.
The country's sugar production is broadly divided into two regions—the northern zone, comprising Uttar Pradesh, Punjab, Haryana and Uttarakhand, and the south-western zone, including Maharashtra, Gujarat, Karnataka and Tamil Nadu.
Weak monsoon threatens western India
The biggest concern lies in the south-western sugar belt, where sugarcane cultivation depends heavily on rainfall.
Sugarcane planting in Maharashtra largely takes place between July and September, making the crop highly vulnerable to deficient monsoon rains. Any significant reduction in rainfall this year would not only affect the 2026-27 crop but could also impact sugar production during the 2027-28 season.
In contrast, the northern states have relatively better irrigation infrastructure, reducing the immediate production risk. However, lower rainfall is expected to increase irrigation costs and squeeze farmers' margins.
Uttar Pradesh faces structural challenges
India's largest sugar-producing state, Uttar Pradesh, is witnessing a gradual shift away from sugarcane cultivation as farmers struggle with declining yields, rising production costs and labour shortages.
The spread of diseases such as red rot, coupled with the slow availability of disease-resistant, high-yielding sugarcane varieties, has further weakened farmer confidence.
Progressive farmer Umesh Kumar from Shamli district said inadequate investment in sugarcane research and varietal development is beginning to show on the ground.
"Lower productivity is forcing many farmers to shift towards plantations, horticulture and other crops that offer better returns," he said.
Growing diversion to jaggery and khandsari
Another emerging challenge for sugar mills is the increasing diversion of sugarcane towards jaggery and khandsari units, which often offer farmers higher prices than sugar mills.
As a result, Uttar Pradesh's sugar mills crushed nearly 7.3 million tonnes less sugarcane during the current season. The sugar industry has therefore been demanding stricter regulation of crushers and khandsari units to ensure adequate cane availability for mills.
Tough road ahead
With sugarcane acreage under pressure, productivity declining and monsoon uncertainty looming, the next two sugar seasons are likely to remain challenging for both the sugar and ethanol industries.
If production weakens further while domestic demand remains stable, India could eventually face the prospect of shifting from being a sugar exporter to becoming an importer—an outcome that would have been difficult to imagine only a few years ago.