The Indian Sugar & Bio-Energy Manufacturers Association (ISMA) has raised serious concerns about the sugar sector’s future. ISMA Vice President Niraj Shivgaokar stated that a significant reduction in ethanol allocation from sugarcane could lead to distilleries not being used to their full potential. This could also mean less sugar being diverted for ethanol production. As a result, there might be too much sugar left over, leading to problems with paying farmers for their sugarcane.
For the 2025-26 Ethanol Supply Year (ESY), only 289 crore litres of ethanol have been allocated from sugarcane-based sources. This is a small part, just 28%, of the total need. In contrast, ethanol made from grains has been given a much larger share of 72%, which is 760 crore litres.
This is worrying because the sugar industry has invested over ₹40,000 crore to build the capacity to produce more than 900 crore litres of ethanol. This investment was made based on NITI Aayog’s 2021 Biofuel Roadmap. This plan expected the sugar sector to provide about 55% of the total ethanol needed for 20% blending by 2025-26. The current allocation goes against this plan.
The imbalance could mean that distilleries will be underused, operating at less than 50% of their capacity. It is also expected that around 34 lakh metric tonnes (LMT) of sugar might not be diverted for ethanol. This would lead to a large surplus of sugar in the market.
Furthermore, the financial strain on sugar mills could cause delays in payments to farmers. This increases the risk of cane arrears, where farmers are not paid on time for their produce. The sugar industry is already facing tight profit margins and needs a lot of working capital.
Deepak Ballani, Director General of ISMA, also mentioned the need to increase the Minimum Support Price (MSP) for sugar. He said the cost of producing sugar is about ₹40.20 per kg. He welcomed the Uttar Pradesh government’s decision to increase the State Advised Price (SAP) for sugarcane by ₹30 per quintal. This will help farmers get an extra ₹3000 crore. However, he stressed that the government needs to make sure sugar mills can afford to pay farmers on time, especially with rising costs.
**Ethanol Pricing Issues**
The price paid to mills for ethanol made from sugarcane juice and B-heavy molasses has not changed. However, the Fair and Remunerative Price (FRP) of sugarcane has gone up significantly, by 16.5%, from ₹305 to ₹355 per quintal since the 2022-23 season. The cost to produce ethanol is around ₹66.09 per litre from B-heavy molasses and ₹70.70 per litre from sugarcane juice. But the current buying prices of ₹60.73 and ₹65.61 per litre, respectively, mean mills are losing about ₹5 per litre. This makes producing ethanol from sugarcane financially difficult and affects the mills’ ability to pay farmers.
**Urgent Need to Increase Sugar MSP**
The MSP for sugar has been fixed at ₹31/kg since February 2019. In the same period, the FRP for sugarcane has risen by about 29%. This has pushed the cost of producing sugar to around ₹40.24/kg. This large difference between production cost and MSP means mills are selling sugar at a loss.
Domestic sugar prices are already falling and are expected to drop further by December 2025. This will make it very hard for mills to manage their finances, leading to more delays in paying farmers and increasing cane arrears. With expected sugar production being higher than domestic consumption and limited diversion to ethanol, the market will likely be flooded with sugar, pushing prices down and worsening the financial situation for both mills and farmers.