Cane arrears start building up, govt considering proposal to allow more sugar exports & hike in MSP
India is considering raising sugar exports, MSP, and ethanol diversion to manage a looming supply glut and prevent delayed cane payments. With production projected at 34.3 MT and prices weakening, officials aim to protect farmers and reduce stockpiles. Mills report rising arrears, while industry seeks a cost-linked MSP and higher ethanol allocations.
To protect farmers against the delay in cane payment due to the possibility of glut, the government is aiming to deal with surplus supplies through allowing additional exporters and diverting more sugar for ethanol production.
“In the next month or so we will come out with certain decisions, which would assist the sugar industry and ensure the timely cane payment to farmers,” Sanjeev Chopra, secretary, department of food and public distribution, told reporters after the annual general meeting of Indian Sugar and Bio-energy Manufacturers Association (ISMA).
Hiking the minimum sale price (MSP) and allowing more allocation for ethanol along with allowing more exports of sweetener from the current sanctioned volume of 1.5 million tonne (MT) sugar season – 2025-26 (October-September) are some of the measures under discussion.
Cost-Price Mismatch
However, because of the current low price of sugar globally, only around 0.15 MT of sugar has been exported so far in the current season.
Chopra said the sugar industry expects that by mid-January, when a glut in supplies is anticipated, prices will gradually decline, posing challenges for the sector.
He stated that “the excessis going to hurt the farmers, which we cannot afford to do. So, in their interest, and also in the interest of all the stakeholders, you need to ensure that the surplus stocks are contained,”.
Meanwhile, Gautam Goel, president, ISMA said that in Maharashtra, there is beginning of build up in cane arrears to farmers while initial estimates indicate that cane arrears of Rs 2000 crore has been built up so far as prices have fallen.
“To avoid cane arrears and sugar stocks to build up after several years, increase in FRP should be in commensurate with hike in MSP,” Goel said. He said that given that lower weightage of sugar in the consumer price index (CPI) basket and the fact that MSP revision entails no fiscal burden on the government, there is an urgent need for moving towards cost-linked MSP formula for timely cane payment.
Balancing the Biofuel Equation
The sugar industry also demanded revision of MSP of sugar which has remained unchanged at Rs 31/kg since February, 2019, while fair and remunerative price (FRP) has increased by 29% to Rs 355/quintal, which had boosted cost of production to Rs 41.66/kg at present.
In addition, in the current ethanol supply year – 2025-26, the sugar sector’s allocation has been drastically reduced to 2890 million litres, only 28% share of the oil marketing companies procurement of 11,000 million litres which includes procurement from the maize and rice based biofuel manufacturers. However ethanol production capacity of sugar-based feedstock is currently at 9000 million litres.
In the current sugar season, where crushing activities are on, ISMA has projected sugar production at 34.3 MT, an increase of 16% from 2024-25 sugar. Out of total output while 3.4 MT would be diverted for ethanol manufacturing and 1.5 MT is approved for exports in the current season
With annual consumption of sweetener in 2025-26 season is projected at 28.5 MT and opening balance as on October 1 was 5 MT, opening balance at the end of season is estimated at 6 MT, more than two months of consumption.
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Source : Financial Express
