Sugar prices rise, making mills favor sugar over ethanol
What's the story
A surge in sugar prices has led Indian mills to prioritize sugar production over ethanol, as per their quarterly earnings calls earlier this month. The decision is primarily aimed at improving profit margins. Executives expect a policy intervention that would restrict the diversion of B-heavy molasses for ethanol production. B-heavy molasses has more fermentable sugars than C molasses, resulting in higher ethanol yields of about 25%.
Market dynamics
Balancing sugar availability, ethanol diversion critical: BCM
Vivek Saragi, Chairman and Managing Director of Balrampur Chini Mills (BCM), stressed the importance of balancing sugar availability and ethanol diversion for stable prices and healthy industry economics.
He said, "In this environment, maintaining the right balance between sugar availability and ethanol diversion will be important for stable prices and healthy industry economics."
Profit margins
Sugar prices have increased due to deficient rains
Currently, sugar prices are around ₹46 per kg (ex-mill), making sugar manufacturing the most viable option among various sugarcane products and by-products.
As of August 17, whole rates were around ₹45.2-45.25/kg (₹4,520-4,525/quintal) due to deficient rains in key producing states Maharashtra and Karnataka impacting production amid strong domestic demand.
For the 2025-26 sugar year, India's total sugarcane diversion toward ethanol is estimated at three million tons with some 0.9 million tons directly supporting government's E20 blending program.
Strategic shift
Shift toward maximizing sugar production
E.I.D.-Parry's management also hinted at a strategic shift toward maximizing sugar production over ethanol/ENA volumes in the near term.
Ashiq J, Chief Operating Officer of E.I.D.-Parry, said, "It makes sense to produce more sugar at this current pricing."
He added that they will evaluate their options for producing ethanol, ENA and sugar from feedstock as a constant review mechanism where they try to maximize their margins.