Sugar sector hopes for hike in minimum selling price in Budget, Balrampur Chini, Shree Renuka Sugars, Dalmia Bharat stocks eyed

Sugar output could rise 13 percent in 2025-26 season.

• Sugar industry seeks MSP hike to Rs 40–41/kg in upcoming Union Budget
• Ethanol allocation falls short, impacting distillery viability
• Margins may face pressure without policy intervention

Did our AI summary help?

The sugar industry is hoping for a hike in the minimum selling price (MSP) in the upcoming Union Budget, which would offset the dual pressure from rising cane prices and lower realisations. Market participants will be watching sugar stocks like Balrampur Chini Mills, Shree Renuka Sugars, Dalmia Bharat Sugar, and Triveni Engineering.

"There is a critical need for a revision of the minimum selling price (MSP) for sugar to around Rs 40–41 per kg, which has remained unchanged at Rs 31 per kg since 2019 to ensure mill viability and timely payments to farmers," said Tarun Sawhney, Vice Chairman and Managing Director, Triveni Engineering & Industries.

Sawhney added that sugar diversion for ethanol production has been restricted to 34 lakh tonnes in the first tender cycle, with ethanol allocation reaching only 290 crore litres this year, significantly below the expected 450 crore litres.

"This shortfall has created a supply imbalance. Compounding the issue, ethanol production costs are 70–75 percent dependent on raw materials, and the fair and remunerative price (FRP) has increased 29 percent to Rs 355 per quintal. Despite these rising input costs, ethanol prices remain unchanged, undermining distillery viability," he said.

In a note, Elara said that the sugar industry is staring at another crisis which is likely to unfold sooner than later given the absence of policy interventions. "While cane acreages, sugar output and sales are chugging along, there are serious concerns regarding cost inflation, strained realization for both sugar/ethanol and grain (FCI rice + maize) becoming a preferred route for ethanol blending," the brokerage added.

While the viability of sugar mills is not under question, there could be serious erosion of profitability in the ensuing quarters without any policy interventions.  The sugar industry is also looking towards a roadmap beyond the 20 percent ethanol blending.

Clamor to increase the minimum support price (MSP) is also growing but any decision is pending. Hence, Elara expects margins to face significant headwinds in the absence of any relief measure.

"As Budget 2026–27 approaches, balancing short-term relief with long-term clean energy policy support will be critical to stabilise the sugar industry, protect farmer incomes and support India’s clean energy transition," said Sawhney.

According to the All India Sugar Trade Association (AISTA), India's sugar production could see an uptick of 13 percent to 29.6 million tonnes in the 2025-26 season which ends in September. This figure is excluding the permitted diversion for ethanol.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.