The Indian Sugar Mills Association (ISMA) has raised concerns about an impending crisis in the sugar industry, warning that many mills may struggle financially if ethanol prices are not revised promptly.
With fluctuating sugar prices, ethanol production has become an essential source of revenue, providing sugar mills with a stable income stream that helps offset losses when sugar prices fall.
Ethanol’s significance has grown in recent months as sugar prices continue to decline. ISMA President M Prabhakar Rao told CNBC-TV18 that there is urgent need for government intervention to ensure stability in the industry and support the broader ethanol-blending initiatives. He noted that delays in the crushing season, which is impacting key states like Maharashtra and Karnataka, are contributing to the drop in sugar prices. Rao suggested that state elections in Maharashtra could lead to further delays in the crushing season, initially expected to start in mid-November.
Decline in sugar prices and rising costs
Currently, average sugar prices have dropped to approximately Rs 35-35.5 per kilogram, down from Rs 38 per kilogram last year, due to an excess supply of sugar stocks. ISMA has called for an increase in the minimum selling price (MSP) of sugar to Rs 39.14 per kilogram, up from the current Rs 31, arguing that mills are incurring losses due to high production costs. Under the Sugar Price (Control) Order of 2018, MSP should reflect Fair and Remunerative Price (FRP) levels, but ISMA argues that the current MSP does not cover rising input costs.
Since February 2019, the FRP of sugarcane has risen five times, reaching Rs 340 per quintal for the 2024-25 season. Despite a decline of around Rs 2 per kilogram in sugar prices, the FRP has increased by 6 per cent, further straining the financial viability of mills as they are obliged to buy sugarcane at a fixed rate set by the government, regardless of the market price of sugar.
“We need urgent support from the government to increase the MSP of sugar to reduce losses faced by the industry,” Rao added. He further said that increasing the MSP would help ensure the financial viability of mills, especially during the crushing season, when prices tend to fall below production costs, leaving mills financially vulnerable.
