R. Suryamurthy
Get ready to pay more for your daily dose of sweetness. India’s sugar reserves are on the brink of hitting critically low levels, a situation that’s expected to send retail prices soaring in the first half of fiscal year 2026. This stark warning comes from India Ratings and Research (Ind-Ra), painting a concerning picture for household budgets.
The culprit? A significant 15% year-on-year drop in sugar production for the 2024-25 sugar season (SS25), hitting a five-year low of 29.0-29.5 million tonnes. This decline is largely due to lower sugarcane yields and reduced sugar recovery, exacerbated by a plant disease known as Red Rot.
What does this mean for you? India’s sugar stock is projected to shrink to a dangerously low 5.3-5.5 million tonnes – barely meeting the country’s minimum requirement of 5.5 million tonnes. While a healthy opening inventory from previous seasons has kept shelves stocked for now, this marks the first production deficit in nearly eight years.
“With sugar production at a five-year low, India’s sugar inventory is likely to reduce to around the normative level by the end of SS25,” stated Khushbu Lakhotia, Director, Corporate Ratings, Ind-Ra. “The lower production has led to hardening of prices over the past few months, and they are likely to remain strong over the course of the season, given the low stock levels.” In simpler terms, expect to see your sugar bill go up.
Ethanol’s Woes Could Impact Your Wallet Too
Adding to the complexity, the profitability of the ethanol segment, a key part of the sugar industry’s revenue, has taken a hit. This might seem unrelated to your grocery bill, but it plays a role in the overall health of sugar producers. Restrictions on ethanol production and rising costs without corresponding price hikes have squeezed margins for sugar companies.
The government’s mandated price for sugarcane (Fair and Remunerative Price or FRP) has increased by 4.4% for SS26, which means sugar producers are paying more for their raw material. If ethanol prices don’t keep pace, it could put further pressure on the industry, potentially impacting sugar supply down the line.
Blending Targets and the Road Ahead
Despite the challenges, India is on track to achieve its 20% ethanol blending target for vehicles a year ahead of schedule. However, less sugar than initially forecasted has been diverted for ethanol production due to the overall lower sugar output and stagnant ethanol prices. Interestingly, grains like maize are now contributing significantly more to ethanol supply, a shift from the historical dominance of sugar.
While this diversification is good, Ind-Ra warns that future increases in blending targets will face hurdles like ensuring enough feedstock and addressing potential reductions in vehicle fuel efficiency.
For now, initial forecasts suggest a potential recovery in sugar production for the next season, thanks to a good monsoon in 2024. However, it’s still too early to tell definitively. So, for the immediate future, consumers should brace themselves for continued strong sugar prices. It might be time to start looking for those sales or exploring alternatives to sweeten your cup!