Karnataka Sugar Mills Urge PM for revision of sugar MSP and ethanol procurement prices
SISMA-Karnataka urged the Prime Minister to immediately raise ethanol procurement prices and sugar MSP for ESY 2026-27, warning mills face severe financial stress after sugarcane FRP increased to Rs 365/quintal. The association said stagnant ethanol prices, rising costs, and shrinking margins could force widespread mill closures.
The South Indian Sugar Mills Association – Karnataka (SISMA-Karnataka) has written an urgent letter to the Prime Minister, dated May 16, 2026, seeking an immediate revision of ethanol procurement prices and the Minimum Selling Price (MSP) of sugar for the 2026-27 Ethanol Supply Year (ESY).
The industry body has flagged a severe financial crisis, triggered by a recent hike in sugarcane prices without corresponding adjustments in revenue streams, which it warns could push numerous mills into closure.
The letter points out that while the Fair and Remunerative Price (FRP) of sugarcane for the 2026-27 season has been increased by Rs 10 per quintal to Rs 365 per quintal-a move necessary to protect farmers-it has simultaneously “escalated the financial burden” on sugar mills and ethanol producers.
SISMA-Karnataka highlights that procurement prices for ethanol derived from sugarcane juice, sugar syrup, and B-heavy molasses have seen only “marginal revisions” over the past five years. This stagnation is particularly glaring compared to the continuous rise in sugarcane FRP and the significant upward revisions granted to grain-based ethanol.
The association paints a dire picture of the sector’s financial health, stating that many mills are facing “acute working capital shortages.” The inability to revise the sugar MSP or ethanol prices has led to delayed cash flow cycles and mounting interest burdens, reduced operating margins and high inventory carrying costs.
Banks and financial institutions becoming “increasingly cautious” in extending credit due to deteriorating balance sheets.
“Many units today are operating under significant financial distress and some mills are on the brink of closure if immediate corrective policy support is not provided,” the letter warns.
The association cautions that large-scale closures would have catastrophic consequences not just for the industry, but for “lakhs of sugarcane farmers dependent on timely payments,” rural employment, ancillary industries, and the broader rural economy.
While acknowledging that the Ethanol Blending Programme (EBP) has been a “crucial” stabilizer-improving mill liquidity and reducing sugar surpluses-SISMA argues that the EBP’s sustainability is now threatened. To remain viable, the procurement prices of sugarcane-based ethanol must adequately reflect rising sugarcane costs, energy expenses, and operational inflation.
In its representation to the PM, SISMA-Karnataka has formally requested an urgent upward revision in procurement prices for ethanol derived from sugarcane juice, sugar syrup, and B-heavy molasses for ESY 2026-27 and a revision of the sugar MSP to align with prevailing cost realities.
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Source : ChiniMandi
