Mumbai, July 9 -- With India's sugar sector increasingly constrained by government price controls and climate volatility, Balrampur Chini Mills is making a Rs.2,850-crore wager on a new growth engine: bioplastics.

The country's second-largest sugar producer is setting up its first plant to manufacture polylactic acid, or PLA, a biodegradable plastic derived from sugar. The facility, expected to be operational by early 2027, will be built next to its existing mill in Kumbhi, Uttar Pradesh, and consume roughly 10% of the company's sugar output, according to Stefan Barot, president of Balrampur's chemicals division.

The plant will have a production capacity of 80,000 tonnes per annum, Barot said in an interview in Mumbai.

Balrampur is tar...