Stagnant sugar MSP, higher cane price risks delayed farmer payments: Deepak Ballani
Sugar mills face severe cost–price pressure as cane prices rise while MSP remains unchanged at ₹31/kg. ISMA seeks an MSP aligned with production costs and higher ethanol allocations to avoid surplus sugar, underused distilleries, and delayed farmer payments. It recommends rebalancing ethanol sourcing, revising prices, and advancing flex-fuel adoption.
In an interview to ChiniMandi, Deepak Ballani, DG of Indian Sugar and BioEnergy Manufacturing Association (ISMA) said that sugar mills are bearing a much higher cost of sugar production on account of higher FRP and SAP announced in the current season, whereas the Minimum Selling Price (MSP) of sugar continues to remain static and much below the cost of production borne by the mills. This will impact the timely payment of sugarcane prices to the farmers.
Q. With the recent surge in sugarcane prices across states like UP, Karnataka, Punjab, Haryana, and Uttarakhand, how has the rise in sugar production cost impacted millers’ profitability and operations?
Ans: SAP of different states have been revised upwards significantly, with U.P. at Rs. 400 /qtl (around 30% weightage in total production), Haryana – Rs. 415 per qtl, Punjab – Rs. 416 per qtl and Uttarakhand – Rs. 405 per qtl.
Additionally, the Karnataka Government has also increased the sugarcane price to Rs. 320 – 330 per qtl plus Harvesting and Transportation (H & T) costs (avg. around Rs. 90 per qtl).
Therefore, the total cost of producing sugar in the 2025–26 season is now estimated at around ₹41.7/kg, resulting in a significant cost–price misalignment that threatens the sugar mill’s viability.
The average ex-mill price for Maharashtra and Karnataka is hovering much below the cost of production of sugar at around Rs. 37.5 per kg, while the pan-India average cost of production is around Rs. 39 per kg. This clearly shows the gap between the ex-mill price and the cost of production of sugar, directly impacting the profitability of the sugar mills, which will have an impact on the sugarcane payments to the farmers.
Q. The Minimum Selling Price of sugar has remained unchanged for over six years. What specific MSP level is ISMA proposing now to ensure fair returns for mills and timely payments to farmers?
Ans: The MSP for sugar has remained unchanged at ₹31/kg since February 2019, while the FRP of sugarcane has increased from ₹275 to ₹355 per quintal (2025–26) — a rise of 29%. However, it may also be noted, as stated above, that SAP states have a weightage of around 35 – 40%, and SAP announced by the state Governments is even higher than the FRP of sugarcane announced by the Central Government.
Additionally, the Karnataka cane price is now among the highest, much higher than the FRP of sugarcane.
We believe that the MSP of sugar should be adequate enough to at least cover the cost of production of sugar.
Q. The sugar industry’s ethanol allocation is currently only 27.5% of total allocations. How is this underutilisation affecting mill operations, distillery capacity, and financial viability?
Ans: The sugar mills are affected by the lower allocation of ethanol, as given below:
1. Underutilisation of Installed Capacity: Lower ethanol allocation may reduce distillery utilisation to below 50%, leaving assets idle and threatening economic viability, loan repayment, and operational stability.
2. Reduced Sugar Diversion: With lower ethanol offtake, only ~34 LMT of sugar is expected to be diverted (after 1st cycle of allocations) — leading to surplus stocks, price pressure, and financial strain on mills.
3. Financial Stress & Cane Payment Delays: Declining ethanol revenues will cause liquidity crunches, impacting mills’ ability to repay loans and pay farmers on time, resulting in farmer distress.
4. Employment & Rural Impact: Reduced operations could trigger job losses and lower rural incomes, particularly in regions with limited alternative livelihoods.
5. EBP Imbalance & Sectoral Distortion: The Ethanol Blending Programme is tilting towards grain-based ethanol, leaving sugar-based capacity underused.
Overdependence on food grains (especially maize) may affect feed availability, cropping patterns, and carbon intensity, while sugarcane-based ethanol offers better emission reduction and rural sustainability.
Q. What are the recommendations of ISMA?
Ans: We have made several recommendations to the Government, which we feel will ensure a smooth season for the industry.
1. Rebalance ethanol allocations by reserving at least 50% share for sugar-based feedstocks in line with NITI Aayog’s EBP roadmap.
2. Ensure Fair Allocation in Cycle 2 Tender: Allocate 150 crore litres of ethanol from sugarcane juice and B-heavy molasses (BHM) to maintain supply balance and sectoral stability.
3. Enhance ethanol blending beyond E20 gradually (E22, E25, E27) and launch E100 fuel supported by Flex-Fuel & Hybrid Vehicles on the lines of the success of the Biofuel programme in Brazil.
4. Promote Flex-Fuel & Hybrid Vehicles: Provide GST rationalisation and super-credits under CAFÉ norms to encourage adoption.
5. Announcement of revised ethanol procurement prices as per the Government Formula for ESY 2025–26.
6. Integrated Biofuel Policy: Develop a comprehensive framework on the lines of Brazil’s model, linking fiscal incentives, consumer pricing, and blending targets.
To Read more about Sugar Industry continue reading Agriinsite.com
Source : Chinimandi
