CACP recommends revision in sugarcane-based ethanol prices, dual pricing for sugar, and high-powered committee on cane area norms
The Commission for Agricultural Costs and Prices urged revising ethanol prices from sugarcane feedstocks, citing lag behind FRP hikes. It also proposed dual sugar pricing and structural reforms, warning that excess capacity and limited cane supply are straining India’s sugar industry.
New Delhi: The Commission for Agricultural Costs and Prices (CACP) has recommended that the Central government revise the procurement price of ethanol derived from sugarcane-based feedstocks, noting that increases in such prices have lagged significantly behind the growth in the Fair and Remunerative Price (FRP) of sugarcane over the past five years.
The recommendations came alongside the Union Cabinet’s approval on Tuesday of a Rs 10 per quintal increase in the FRP of sugarcane, taking it to Rs 365 per quintal for the 2026-27 season, based on CACP’s own price recommendation, The Hindu BusinessLine reported.
In its non-price recommendations, the Commission acknowledged that the administered price mechanism for sugarcane-based ethanol and guaranteed procurement by state-run oil marketing companies (OMCs) under the Ethanol Blended Petrol (EBP) Programme had helped stabilise the Indian sugar sector and ensured timely cane payments to farmers. However, it pointed out that prices of ethanol produced from sugarcane juice, sugar, sugar syrup, and B-heavy molasses had risen only marginally during the last five years, even as the FRP of sugarcane and prices of grain-based ethanol moved higher. “The Commission, therefore, recommends that the Government should revise the price of ethanol from sugarcane-based feedstocks in view of increase in FRP of sugarcane,” the CACP said. The recommendation is particularly significant given that the sugar industry has been pressing for an upward revision in ethanol prices for some time.
On sugar pricing, the CACP recommended that the government explore the feasibility of a dual pricing mechanism for sugar, distinguishing between domestic consumers and commercial or industrial users. The Commission noted that the industrial and commercial sector accounts for approximately 60 to 65 per cent of total sugar consumption in the country, and that various state governments, sugar industry bodies, and industry associations had themselves proposed a dual pricing policy.
The CACP also observed that the Indian sugar industry had undergone significant structural transformation over the last decade, diversifying into ethanol production and adding substantial distillery capacity. However, it cautioned that rapid capacity expansion had not been matched by commensurate growth in cane availability or market demand for sugar. “Rapid expansion in capacity not accompanied by growth in cane availability and market demand for sugar has contributed to lower capacity utilisation and closure of over 30 per cent of sugar factories in 2024-25 season,” the Commission said, noting that 240 factories had shut during that season.
To address these structural challenges, the CACP recommended the constitution of a High-Powered Expert Committee comprising representatives from the Central and state governments, the sugar industry, academic institutions, and farmers. This committee would be tasked with reviewing cane area reservation norms, minimum distance criteria between mills, the revenue sharing formula, and the feasibility of dual pricing, among other issues.
The Commission further recommended that cane area reservation and minimum distance criteria be reviewed to prevent unhealthy competition among sugar factories and ensure adequate cane supply to mills. It noted that while these norms were originally designed to guarantee cane supply to mills, prevent mill-level competition, and ensure farmers received FRP or State Advised Price (SAP), capacity additions and expansions over the past two decades had resulted in low capacity utilisation across the sector.
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Source : ChiniMandi
