Sugar Sector Profitability Boosted by Global Prices and Government Policies
India’s sugar mills are set for higher profits amid strong inventories, a likely MSP hike, rising global sugar prices, and a weak Rupee, according to Centrum Broking. Ethanol output is also growing, aided by FCI rice supplies. ISMA expects a robust 2025-26 season due to favorable monsoon-driven cane planting and renewed export permissions after last year’s curbs.
In a recent report by Centrum Broking, India’s sugar mills are poised for increased profitability this season, bolstered by improvements in balance sheets due to robust closing inventory forecasts. The country’s sugar marketing season spans from October to September, highlighting a period of potential financial uplift for the industry.
Furthermore, the anticipated increase in the Minimum Support Price (MSP) for sugar provides significant optionality for these mills, according to the brokerage firm, which maintains a “constructive” outlook on the sugar sector. Notably, the MSP of sugar has remained unchanged at Rs 31 per kg since its last adjustment in February 2019.
Additional benefits are expected from high global raw sugar prices and a weak Rupee, which may enhance the attractiveness of exports if a quota is approved for SSY26, the next sugar season starting October 2025. The government’s decision to allow the use of Food Corporation of India (FCI) rice for ethanol production represents a significant development predicted to amplify distillery capacity utilization.
Rice is being sold to ethanol distilleries at a fixed price of Rs 2,250 per quintal, not exceeding 24 lakh tonne, under the current Open Market Sale Scheme policy. This FCI rice supply is available to distilleries across both deficit and surplus states all year long. A recent recovery in sugar prices has greatly boosted the EBITDA margins of sugar companies in the January-March quarter of 2024-25.
During this quarter, sugar prices rose sharply by 10 percent, with refined sugar prices in Uttar Pradesh reaching up to Rs 42,000 per tonne and maintaining above Rs 40,000 per tonne. The Indian Sugar and Bio-Energy Manufacturers Association (ISMA) remains optimistic about the 2025-26 season, citing favorable weather and improved planting conditions.
The 2024 monsoon positively impacted cane planting, especially in Maharashtra and Karnataka, ensuring a timely onset of the crushing season by October 2025. ISMA praised the government’s sugar export policy, citing it as beneficial for the industry. After imposing trade restrictions in the 2023-24 season, the government permitted the export of one million tonnes of sugar starting January 21. This move follows a period of export restrictions aimed at maintaining domestic price stability.
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Source : Devdiscourse
