Indian Sugar Industry Faces Crisis Amid Ethanol Allocation Cuts

The Indian Sugar and Bio-Energy Manufacturers Association (ISMA) has raised urgent concerns regarding the potential financial instability in the sugar industry, citing significant disparities in ethanol allocation and stagnant sugar prices. In a statement released on Wednesday, ISMA urged the government to address these disparities swiftly to prevent a looming crisis that could affect farmers and mills alike.

ISMA highlighted that for the 2025–26 Ethanol Supply Year, only 289 crore litres of ethanol have been allocated from sugar-based feedstocks. This figure represents a mere 28% of the total requirement, while 72%, or 760 crore litres, has been allocated from grain-based sources. The association warned that this imbalance may lead to surplus sugar stocks, underutilized distilleries, and delayed payments to farmers.

The rising costs in the sector further complicate the situation. Since the previous year, the Fair and Remunerative Price (FRP) for sugarcane has increased by 16.5%. Despite this, ethanol prices from juice and B-heavy molasses have remained unchanged, creating a pricing gap of Rs 5 per litre. ISMA noted that the cost of producing ethanol is Rs 66.09 per litre from B-heavy molasses and Rs 70.70 per litre from sugarcane juice. However, current procurement prices stand at Rs 60.73 and Rs 65.61 per litre, respectively, leading to an untenable pricing situation.

The association also pointed out that the Minimum Selling Price (MSP) for sugar has not changed since February 2019, remaining at Rs 31/kg. Over the same period, the cost of sugarcane has risen from Rs 275 to Rs 355 per quintal, a 29% increase. This discrepancy has resulted in the current cost of sugar production being estimated at Rs 40.24/kg, indicating a significant misalignment between costs and prices.

Deepak Ballani, Director General of ISMA, emphasized that the recent policy changes regarding ethanol allocation and the unchanged MSP could exacerbate the problem of sugarcane arrears. “This policy shift could strain mill finances and delay payments to farmers,” he stated during a press conference.

In light of these challenges, ISMA has called on the government to align ethanol allocation with the roadmap set out by NITI Aayog. The association is advocating for a revision of ethanol prices to reflect current production costs and an increase in the sugar MSP to match the higher FRP and production expenses. Additionally, ISMA has urged for clarity on export policies for 2025–26 to effectively manage surpluses and maintain liquidity within the industry.

As the sugar sector navigates these complex financial challenges, the outcomes of government actions in the coming months will be pivotal in determining the industry’s stability and the timely compensation of farmers.