Sugar Stocks Surge Up to 20% on Lower Production and Rising Prices

Sugar stocks rallied up to 20% on Tuesday after reports indicated a significant drop in sugar production across key states—Maharashtra, Karnataka, and Uttar Pradesh. According to PTI, India’s sugar production for the 2024-25 season has fallen 16.13% year-on-year to 23.71 million tonnes.

The National Federation of Cooperative Sugar Factories (NFCSF) estimated total production at 25.9 million tonnes for the season, much lower than last season’s 31.9 million tonnes. This also contrasts with the India Sugar Mills Association’s (ISMA) earlier estimate of 27.22 million tonnes. Maharashtra, India’s largest sugar-producing state, saw its output fall from 10.04 million tonnes last year to 7.86 million tonnes as of March 15, 2025.

Sugar Stocks Rally on Positive Outlook

Shares of sugar companies surged following the production decline and optimism about future recovery. Uttam Sugar Mills share price hit a 20% upper circuit at ₹230.75 after India Ratings and Research (Ind-Ra) projected an earnings recovery in FY26. Increased sugar and ethanol sales, rising sugar prices, and capacity expansion will likely drive this.

Other sugar stocks also saw strong gains:

• Magadh Sugar & Energy share price rose 14% to ₹585
• Avadh Sugar & Energy share price gained 10% to ₹428.95
• Dalmia Bharat Sugar share price increased 9% to ₹344.50
• Mawana Sugars share price advanced 7% to ₹89.24
• Dwarikesh Sugar share price climbed 7% to ₹39.09
• Shree Renuka Sugars share price went up 5% to ₹28.55
• Triveni Engineering share price rose 5% to ₹383.30
• Balrampur Chini Mills share price increased 3% to ₹494.70

At the same time, the BSE Sensex was up 1.2% at 75,059 as of 12:14 PM.

Ethanol Production and Pricing Trends

Ethanol sales remained steady at 45.5 million litres in the first 9 months of FY25, compared to 46.8 million litres in the same period last year. However, ethanol allocations for early 2025 have increased, signalling a potential revival after the government eased restrictions on diverting sugar for ethanol production.

While sugar mills have raised sugar prices to offset lower recovery, ethanol prices have not increased, leading to weaker margins in the distillery segment. 

Future Outlook: Government Policies to Play a Key Role

To boost ethanol demand, the government has asked Niti Aayog to create a roadmap for increasing ethanol blending from 20% to 25%. This could drive ethanol demand up by approximately 25%. 

Despite current challenges, rising sugar prices and increased ethanol blending targets could support the sector in the coming years.

Conclusion

India’s sugar sector faces short-term hurdles due to lower production and muted ethanol margins. However, rising sugar prices and policy support for ethanol blending could drive long-term growth.

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