The Indian government’s decision to allow free use of sugar, sugarcane juice, and all varieties of molasses for ethanol production has opened a new chapter for the industry. This policy shift is seen as a critical step toward balancing sugar supplies while strengthening the ethanol blending programme.In a conversation with Deepak Ballani, Director General of the Indian Sugar & Bio-Energy Manufacturers Association (ISMA), and Atul Chaturvedi, Executive Chairman of Shree Renuka Sugars, CNBC-TV18 explored the impact of this move on production estimates, pricing, and the overall demand-supply dynamics.Both leaders highlighted how favourable monsoon conditions and improved crop outlook could reshape the sector’s trajectory.
While Ballani stressed the importance of balanced stock management and fair ethanol pricing, Chaturvedi pointed out that a rebound in sugar production provides ample headroom for higher ethanol diversion without fueling inflationary pressures.Together, they underlined that stable policies, coupled with timely price revisions, will be crucial in supporting both millers and farmers as India navigates its next phase of growth in sugar and ethanol.These are the edited excerpts of the interview.Q: What does this mean in terms of the expected production? It was supposed to be a pretty good year for production overall, but now, with sugar and molasses being diverted towards ethanol first of all, do you foresee a lot of diversion, and what will that mean for the price and demand-supply dynamics?Chaturvedi: In fact, last year’s crop, which is going to be ending sometime in October now, was practically a disaster, something like about 29 or 29.5 million tonne at the gross level. This year’s rain Gods have been very, very kind to India, and now it seems a little more kind than what we were expecting. We feel, and the whole industry feels, that production is going to rebound big time.In fact, the Indian Sugar & Bio-energy Manufacturers Association (ISMA), which Mr. Ballani represents, is now estimating that the crop overall could be anywhere between 34 to 35 million tonne. If that happens, there’s no reason why diversion of sugar to ethanol, which current year, is about 3.2 million tonne should not go up to anywhere between 4.5 to 5 million tonne, and the sugar industry is quite capable of supplying to the government.The only request from the industry is that, for far too long, we have been denied a price increase. There is no reason why, from maize, they continue to buy it around ₹72, closer to that, and from cane juice at around ₹65 so that is something which the industry has been demanding, and hopefully the government will this year have the right kind of confidence to take the price up.Q: What has the government done, what is the effect? Does it keeps sugar prices stable? On one hand, it keeps sugar prices stable and not excess supply of sugar in the market, and of course you will be able to sell more ethanol, which gets absorbed now, is that the effect Mr. Chaturvedi for the industry?Chaturvedi: Just look at our numbers. The Indian consumption story is closer to about 28 million tonne, and this year, if the production is going to be anywhere between 34 to 35 million tonne, plus the carryover, there is no fear as far as sugar inflation is concerned. To add to that, even if the sugar prices go up a little, there is no fear, because our Prime Minister has also been saying that the sugar consumption and the edible oil consumption needs to be moderated. In Indian context, higher prices definitely help in moderating consumption.Q: I was not suggesting that there is a risk for sugar inflation. I was just saying that the reason why markets seem to be excited is the fact that, there is an avenue for this excess sugar production, this year’s crop, plus last year’s carry, that you agree with, right?Chaturvedi: Now that last year’s carry is going to be much lower than what was anticipated. Secondly, because the crop actually came down to about 26 or 26.2 million tonne or thereabouts in sugar terms, so the carry out is going to be relatively lower. We do not fear any sugar-related inflation as far as India is concerned.Q: What was the opening stock and now, as Mr. Chaturvedi is saying that this year, the production is going to be maybe 32 to 34 million tonnes what happens to pricing as we enter the festive season? Earlier, perhaps there could have been a fear of some sort of an oversupply, not glut, but at least oversupply that could have been pushing prices down. What happens now, are millers hoping or expecting any price increase this festive season?Ballani: We opened the stock of current season with around 8 million tonne. As Mr Chaturvedi just mentioned, with around 28 million of consumption, we hopefully will be closing the season with around 5-5.2 million tonne. Having said that the next year, crops looks very good and our first estimate, is around 35 million tonnes.Q: So 40 million tonne, we are talking 40 million tonne, then 35 plus the carryover from last year, if it has not been used?Ballani: Yes, so that 35 million tonne is also with an upward bias, and we will be coming out with our second estimate on September 11. The rain Gods have been very kind, and we are getting very consistent monsoon rains in Maharashtra.Q: What about pricing just help us understand.Ballani: The domestic prices have been consistent. Way back in last December, we have seen the domestic prices going way below the cost of production. But because of the export decision, which was given by government in January, the domestic prices saw an upward movement. We are seeing stable prices. In an anticipation of much better crop and much better sugar protection next year, even though we have around 5 million as a closing stock I don’t see that the market will go higher from here. It may go by ₹50-₹100 maximum, but I don’t see it going very high because of the next year sugar production, which is going to be very good.Q: Since these restrictions on ethanol production have come off now, initially, what was the target that we are looking at in terms of ethanol production for FY26 and has that changed a little bit? Will you be looking at upping that guidance?Chaturvedi: Let me correct the picture. The ethanol production in the country was not restricted this year. In fact, it was only 2023-24, that the restrictions were placed on diversion of cane juice into ethanol. Because the government, at that point of time was fearing a massive drop in sugar production. Overall, we feel that the ethanol from the industry should be closer to about 5 billion tonnes this year.As far as Shree Renuka is concerned, obviously, we are one of the large ethanol producers, so it should help better capacity utilisation.Q: Give us a number for Shree Renuka. What will the ethanol production be for this year?Chaturvedi: Ethanol production next year, we anticipate it could be higher than 20 million tonne, as far as Shree Renuka is concerned.Q: As an industry body, what would you be asking for in terms of any increase when it comes to whichever category of molasses, I mean, BC, juice, etc., as this, 5 million tonnes moves towards ethanol production?Ballani: It is very important for the government to maintain a balance of sugar stocks. Since we are going to have a much better production, it is very important that the diversion of almost 5 million tonne is to be done, so that we have balanced stock. We don’t have a surplus stock, because we don’t want to see the domestic market crashing. At the moment, we also look forward for announcement of certain exports of sugar to maintain a balanced stock. So maybe start with a million in October, so that the companies, the mills, could also plan the raw sugar production.Q: What pricing would you seek for molasses?Ballani: For ethanol, it is almost three years, our prices have not been corrected, in spite of the fact that FRT has gone up by almost 17% and our cost of production for juice is almost ₹71. We at least expect government to revise the correct the price of juice to around ₹71-72 at the level of the maize ethanol prices, and the B2 almost ₹66, which is just the cost of increase in raw material, which is the sugar cane. We are very hopeful, because this is very, very important aspect to maintain the viability of the mills, and also to make sure that the mills are able to pay to the farmers on time.
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