Maharashtra’s Sugar Sector: A House Built on Monsoon Sand

-Amarsinh Mokashi

Five years of data reveal a structural transformation — and a widening gap between installed capacity and what the state can actually deliver..

Maharashtra reclaimed its position as India’s largest sugar producer in 2025/26, crushing 1,044 lakh metric tonnes (LMT) of cane to produce 99.20 LMT of sugar. On paper, this looks like a recovery story. Look closer, and the numbers tell a more unsettling tale: a sector whose fundamentals are increasingly disconnected from its installed capacity, its water resources, and its own five-year trendlines.

The Volatility Nobody Can Engineer Around

Between 2021/22 and 2025/26, Maharashtra’s sugar output swung from 138 LMT to a drought-crushed 80.65 LMT and back up to 99.20 LMT — a 42% collapse followed by a 23% rebound, all within four seasons. Unlike Uttar Pradesh, where canal-irrigated cane holds yields in a tight 80-85 t/ha band, Maharashtra’s yield has ranged from 59 t/ha in the 2024/25 drought to 86 t/ha in good years. This is not noise around a stable mean — it is the defining structural fact of the state’s sugar economy.

The reason is uncomfortable but simple: sugarcane occupies less than 4% of Maharashtra’s gross cropped area but consumes 60-64% of its irrigation water, and nearly 80% of that cane grows in drought-prone districts. Only about 35% of cane area is under drip irrigation despite years of policy push. Every monsoon failure doesn’t just dent yields — it cascades through crushing volumes, mill revenue, cogeneration output, and farmer arrears simultaneously.

Private Capital Has Quietly Won

The most consequential shift in the report isn’t a weather statistic — it’s ownership. In 2025/26, private mills (107) outnumbered cooperatives (103) for the first time in Maharashtra’s history, with private share crossing 50% of operating capacity. This closes a chapter that began with the cooperative sugar movement of the mid-20th century.

The drivers are structural, not incidental: cooperative governance has been compromised by political interference, several cooperative mills sit under NCLT proceedings or have shut permanently, and private groups — Shree Renuka/Wilmar, Baramati Agro, Dalmia Bharat — have moved faster on ethanol and cogeneration integration. The state’s own policy of encouraging private takeovers of distressed cooperative mills is accelerating a trend that was arguably already inevitable.

Installed Capacity vs. Deliverable Capacity: A 96% Gap

Perhaps the report’s sharpest number is buried in its capacity-modeling section. To run every sugar mill, distillery, cogeneration plant, and by-product stream in Maharashtra at 100% utilization would require roughly 2,106 LMT of cane annually. Actual 2024/25 production was 1,072 LMT — less than half.

That gap cannot be closed by planting more cane; the state’s water constraints already rule that out. The only credible path is yield improvement — from today’s ~72-74 t/ha toward the 100-110 t/ha that drip irrigation and varietal reform could realistically deliver within two seasons, based on Baramati’s AI-pilot results. The report’s two-year roadmap targets 95 t/ha by 2027/28 while shrinking cane area by 8%, freeing roughly 1.2 lakh hectares for other crops — a rare example of a growth plan built around using less land and less water, not more.

Ethanol: Capacity Without a Buyer

Maharashtra leads India with 145 distilleries and roughly 389 crore litres of installed ethanol capacity — more than any other state. Yet only 36% of that capacity was procured by oil marketing companies in 2025/26, down from 60% just three seasons earlier. Roughly 250 crore litres sit idle.

This isn’t a Maharashtra-specific failure so much as a national one: grain-based ethanol now holds 72% share nationally, squeezing out molasses-based capacity, while procurement prices have stayed frozen even as FRP (the cane price mills must pay) has climbed from ₹290/quintal in 2021/22 to ₹355/quintal in 2025/26. The state’s July 2025 multi-feed distillery policy — allowing plants to switch between molasses, grain, and juice feedstock — is a sensible hedge, but it doesn’t solve the core problem: national tender volumes aren’t absorbing what the state has built.

The Arithmetic Facing Every Mill

The report’s mill-economics modeling is blunt about scale. At current sugar prices (₹44/kg ex-mill), mills below 3,500 TCD (tonnes crushed per day) are structurally loss-making; the minimum viable size in Maharashtra today is closer to 5,000-10,000 TCD, where EBITDA margins run a thin 6-12%. Cane cost — driven by FRP — eats roughly 80% of total mill cost. And the sugar MSP (minimum selling price), frozen at ₹31/kg since 2019, sits below break-even for every mill size in the state, including the most efficient 17,000 TCD operations.

This is the quiet crisis underneath the price headlines: farmers are being paid reasonably well (cane returns roughly 10x cotton per hectare, with 99%+ payment discipline — the best in India), but the mills processing their cane are running on margins too thin to fund the very ethanol, cogeneration, and drip-irrigation investments the sector needs to break its monsoon dependency.

What Cogeneration Gets Right

Not every subplot is bleak. Maharashtra’s cogeneration sector — 2,833 MW contracted, with MERC tariffs of ₹4.75-4.99/kWh — achieves roughly 50% utilization against Uttar Pradesh’s 33%, and exports 60-70% of generated power to the grid versus UP’s largely dormant capacity. This is a case where competitive tariff-setting visibly outperformed the older EPA regime (₹6-7+/kWh), and it’s a template the state could extend to resolve its unresolved bagasse-pricing dispute (MERC’s ₹2,882/MT versus CERC’s recommended ₹3,261/MT), which is currently holding back further generation.

The 2026/27 Wager

Three scenarios frame next season: a Bear case (El Niño intensifies, sugar production falls to 80 LMT), a Base case (normal monsoon, 104.9 LMT), and a Bull case (strong monsoon, 127.5 LMT). The 47.5 LMT spread between Bear and Bull is itself the story — no other major cane-producing state carries this much single-season uncertainty. With reservoirs at just 24.41% capacity as of June 2026 and early reports of cane being cut for fodder in Solapur due to rain deficit, the early signals lean toward the more cautious end of that range.

The Bottom Line

Maharashtra’s sugar sector doesn’t have a cane-diversion problem the way Uttar Pradesh does — its mills already capture roughly 98% of production, versus UP’s 77%. It has a water problem dressed up as a production problem. Every other headline number in this report — recovery rates below UP’s, idle ethanol capacity, thin mill margins, volatile output — traces back, directly or indirectly, to the fact that the state is trying to run India’s largest sugar economy on rainfed and over-drawn groundwater agriculture.

The policy lever most likely to matter over the next five years isn’t the sugar MSP debate or the ethanol procurement fight, real as both are — it’s whether drip irrigation penetration can move from 35% toward 50%+ before the next serious drought arrives.

(Based on Maharashtra Sugar Commissionerate, NFCSF, ISMA, MERC, MoPNG, and CACP data compiled through September 2026.)