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India's sugar production for 2024-25 is expected to drop 15% to 29.0-29.5 million tonnes, the lowest since 2019-20, due to lower cane yields, reduced recovery rates, and red rot infestation. With the government lifting ethanol diversion restrictions in August 2024, about 3.2-3.4 million tonnes of sugar will shift to ethanol production, reducing net sugar availability to 26-26.2 million tonnes.

By mid-May 2025, most mills had stopped operations after crushing 277 million tonnes of cane, 11% less than the previous season. Sugar recovery rates also fell to 9.3% from 10.1%. Despite initial estimates allowing 1 million tonnes of exports, domestic consumption of 28 million tonnes and lower production will likely reduce closing stocks to 5.3-5.5 million tonnes, slightly below the required buffer.

This marks India's first production deficit in seven years, though existing stocks should prevent shortages. Sugar prices rose 5% to Rs 40.3/kg in May 2025 and may remain elevated.

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The government increased cane prices by 4.4% for 2025-26, which may push production costs up by Rs 1.5-2/kg. Ethanol prices saw limited increases despite expectations, affecting profitability. India has achieved 18.6% ethanol blending and appears on track to meet its 20% target early, though concerns remain about feedstock availability and vehicle compatibility at higher blend ratios. Grain-based ethanol now dominates the mix at 51%, while sugar-based ethanol's share has fallen below 40%.