“Sugar mills hit by costly financing; experts push for MSP hike, easy credit”
Sugar prices in India rose 3–3.5% in two months, but mills remain under stress as MSP stays ₹31/kg versus FRP ₹35.50/kg. Industry leaders seek an MSP hike to ₹39/kg and improved bank credit to avoid costly private financing, distress sales, farmer payment delays, and nationwide price distortions.
The domestic sugar prices across India have seen a sudden spurt in the last two months.
The sugar price in Mumbai is trading at Rs. 42.60 per kilo currently, up from Rs. 41.20 per kilo on 19th June 2025, showing a 3 to 3.5% increase in the last few months.
In Delhi, the price is currently quoted at Rs. 44 per kilo from Rs. 43.40 per kilo on 19th June 2025. In Kanpur (Uttar Pradesh), the sugar price is at Rs. 43.80 per kilo, which was at Rs. 43.20 per kilo on 19th June 2025.
The prices in Hyderabad and Chennai are also trading at Rs. 42.40 /kilo and Rs. 44.80 per kilo, from Rs. 41.20 per kilo and Rs. 44.00 per kilo, respectively.
The reason for the price increase is tied to lower monthly quota and tighter balance due to lower production.
However, this buoyancy is not expected to change the financial condition of the sugar mills much in the state. The Minimum Selling Price (MSP) of sugar continues to remain unchanged since 2019 at Rs. 31 per kilo, whereas the current cane FRP is at Rs. 35.50 per kilo. This widening gap between revenue and cost of production is a headache for the mills, especially at the beginning of the new crop season in less than 15 days.
Prakash Naiknavare, Managing Director, The National Federation of Cooperative Sugar Federation (NFCSF), said that the financial institutions and banks typically lend working capital based on the valuation of stocks, which is calculated at the MSP fixed by the Government. “The MSP of sugar is at ₹ 31/kg, which is unchanged for the last 6 years. As a result, the loan component received by the cooperative sugar mills is highly inadequate, leading to accrual of sugarcane arrears & delayed salaries of employees and other outstanding vendor payments”.
Manohar Joshi, MD of Jawahar SSK Ltd. said that it’s high time that the Government should revise the sugar MSP higher. “It would be very difficult to make sugarcane price payment at the prevailing FRP of Rs. 35.50 per kilo, within the stipulated 14 days. The MSP should be revised to a minimum Rs. 39 per kilo, to ensure the industry is cash positive in the ensuing season. Otherwise, it would be very difficult to make the payment.”
Kapil Nema, Industry Expert, said that due to funding constraints, sugar mills are often forced to rely on private sector financiers, who charge extremely high rates of 24–48% for pre-financing. Mills use this funding to cover expenses such as factory maintenance and harvest-and-transport (H&T) advances.
“This expensive financing eventually reflects in the sugar pricing. Once the sugar is produced, financiers push it into the market at discounted rates to recover liquidity and fund the next cycle. During the first couple of months of crushing, nearly ₹500–600 crore is rotated in this manner, affecting the sale of about 6–7% of Maharashtra’s sugar. Though the share seems small, it depresses prices across the states and ultimately influences prices at the national level,” Nema said.
He appealed that strengthening millers’ liquidity is critical, “Easy access to working capital would prevent such distress-driven sales at the start of the season, which otherwise distort price signals and set a weak tone for the entire year”. He said that banks can use independent sources like ChiniMandi and NCDEX to benchmark working capital limits to average sugar prices from the previous season.
“A distress sale of sugar effectively penalises the farmer, who has invested a full year of effort and care into growing the crop,” Kapil Nema concluded.
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Source : Chinimandi
