India's Sugar Production Slides Amid Ethanol Diversion

India's sugar output is set to fall below 27 million metric tons in 2025, significantly down from last season's 31.8 MMT. The reduction is attributed to increased ethanol production, reduced cane availability, and lower recovery levels. Maharashtra, Karnataka, and Uttar Pradesh are among the states affected by this decline.

India's sugar industry is bracing for a notable slump in production for the sugar season year 2025 (SSY25), with output projected to drop below 27 million metric tons. This marks a steep decline from last year's 31.8 million metric tons, according to a recent Centrum report. As of February 15, 2025, sugar production has reached 19.77 million metric tons, marking a 12 percent downturn compared to the same timeframe in the preceding season. The primary causes for this decline include the diversion of sugar for ethanol production, reduced cane availability, and lower recovery rates.

State-specific data shows Maharashtra facing the most severe impact with a 14 percent year-on-year plunge in sugar production. Karnataka experienced a 13 percent decrease, and Uttar Pradesh saw an 8 percent drop. Noteworthy is Karnataka's 22 percent year-on-year reduction in cane availability over the last two weeks, leading to a substantial drop in crushing volumes. Comparatively, Maharashtra's cane availability decreased by 7.8 percent YoY, while Uttar Pradesh showed some resilience with a 1.4 percent increase for the season.

The dwindling cane supply has compelled several mills to prematurely cease crushing operations. The number of mills shutting down rose from 23 on January 31 to 51 by February 15. Sugarcane crushing totals for SSY25 have plummeted to 218 million metric tons, a decline of 4.5 percent from the previous season's 228 million metric tons. Meanwhile, a recent government policy reversal regarding the Food Corporation of India's (FCI) rice price hike, resetting it to Rs 22.5/kg, has caused ripples. In contrast, the ethanol price revision has left industry stakeholders dissatisfied as only the C-heavy route observed a 3 percent price hike, dashing hopes for increases in B-heavy and direct ethanol production routes. Experts predict mills might lean towards CH-based ethanol, which could increase sugar output while diminishing ethanol production.

Despite the production dip, sugar prices remain steady and lucrative. Uttar Pradesh sees prices around Rs 41,000 per ton, while Maharashtra observes rates above Rs 37,500 per ton. These favorable price levels are anticipated to enhance sugar mills' profitability in Q4FY25 and FY26. Additionally, the government's recent sanction of a 1 million metric ton sugar export quota, coupled with a weakened rupee and escalating global sugar prices, could bolster domestic sugar rates. (ANI)

(With inputs from agencies.)