The Indian sugar industry is facing a paradoxical crisis: a bumper crop that is threatening to break its financial back. During the Annual General Meeting (AGM) of the Indian Sugar & Bio-energy Manufacturers Association (ISMA) this week, industry leaders issued a stark warning that without immediate government intervention, the sector faces a massive liquidity crunch and a looming spike in farmer payment arrears.
1. The Numbers: Production Outpaces Consumption
India is staring at a massive surplus. Gross sugar production for the 2025-26 season is estimated at 34.3 million tonnes, significantly exceeding domestic consumption, which has stagnated at approximately 28.5–29 million tonnes.
The Yield Jump: In key belts like Maharashtra and Karnataka, production is up nearly 28% year-on-year due to better recovery rates and favorable weather.
The Price Trap: This glut has already dragged ex-mill prices in Maharashtra down to ₹36–₹36.50 per kg, well below the industry-calculated production cost of ₹41.66 per kg.
2. The Core Demands: Six Years of Stagnation
The industry’s primary grievance is the Minimum Support Price (MSP) for sugar, which has remained frozen at ₹31 per kg since February 2019.
MSP Revision: ISMA and the National Federation of Cooperative Sugar Factories (NFCSF) are pushing for an MSP hike to at least ₹41 per kg. They argue that while the Fair and Remunerative Price (FRP)—the price mills must pay farmers—has risen by nearly 30% in six years, the selling price floor hasn’t moved.
Ethanol Pricing: Mills have invested over ₹40,000 crore in ethanol capacity, yet procurement prices for sugarcane-based ethanol have not been revised in three years. The industry is calling for higher prices to make “B-heavy” and “juice-based” ethanol production viable again.
3. The Arrears Time Bomb
The financial strain is already trickling down to the grassroots. In Maharashtra alone, sugarcane arrears reached ₹2,000 crore as of late November.
The January Deadline: Food Secretary Sanjeev Chopra acknowledged that the “real problem” regarding dues will intensify in mid-January as crushing peaks.
Government Signal: In a rare positive signal for the industry, the government indicated it is “actively considering” a policy package including an MSP hike, higher ethanol allocations, and potentially more exports beyond the current 1.5 million tonne limit.
4. Strategic Outlook: Energy over Exports
With global sugar markets currently facing a glut (led by Brazil), export parity is poor, making international sales a loss-making proposition for Indian mills. Consequently, the industry is pivoting its strategy toward Bio-energy.
The Solution: ISMA is urging the government to allow more sugar diversion toward ethanol—aiming to move from the current 3.4 million tonnes to higher levels to mop up the surplus.
Future Tech: The industry is also exploring “Sweet Sorghum” as a secondary feedstock and pushing for lower GST on flex-fuel vehicles to create a long-term, domestic demand sink for surplus sucrose.
The Bottom Line
The Indian sugar industry is no longer just a food sector; it is a critical pillar of India’s energy transition. However, its “Green Energy” ambitions are currently hamstrung by “Red Ink” on its balance sheets. For investors and stakeholders, the next 30 days are critical: a government decision in January to hike the MSP could be the difference between a stabilized market and a season defined by farmer unrest and mill defaults.
