India’s sugar industry is calling on the government to reinstate a balanced 50:50 production ratio for grain-based and sugar-based ethanol, a move it believes will help stabilize the financial health of sugar mills, ensure timely payments to farmers, and strengthen the overall ethanol ecosystem.
According to Deepak Ballani, Director General of the Indian Sugar & Bio-energy Manufacturers Association (ISMA), the current imbalance—where sugarcane-based ethanol contributes less than 30% to the Ethanol Blending Programme (EBP)—has placed tremendous pressure on mill profitability. Speaking to Sugar Times, Ballani stated that a return to a more equitable ethanol feedstock share would enhance mills’ ability to diversify revenue streams and meet their obligations to farmers.
Sugar Production and Stock Outlook for 2024–25
India’s sugar production for the 2024–25 season is expected to conclude at around 261–262 lakh tonnes, including 3–4 lakh tonnes from the special crushing season in South Karnataka and Tamil Nadu, which will run until September 30, 2025.
Sugar consumption has been estimated at 279–280 lakh tonnes, with a closing stock of approximately 52 lakh tonnes, sufficient to meet demand for October and November. Mills are expected to resume operations by the third week of October, aligning with an early Diwali and helping maintain price stability. Notably, domestic sugar prices have declined by ₹100–₹150 per quintal over the past two months.
Bumper Production Anticipated for 2025–26
ISMA projects a bumper sugar season in 2025–26, driven by increased acreage and better yields in key states like Maharashtra and Karnataka. However, a significant diversion of 40–45 lakh tonnes of sugar to ethanol production is expected.
With global sugar prices under pressure and limited export opportunities, a large stockpile could result in further decline in domestic prices, leading to potential delays in cane payments. The industry is thus pushing for three key measures:
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Increase in ethanol procurement prices
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Announcement of sugar export quotas in advance
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Revision in minimum selling price (MSP) of sugar
Advance export permissions would allow mills to align production schedules and manufacture raw sugar, which is in high global demand.
Sugar Recovery Trends and Varietal Developments
The average gross sugar recovery rate for the 2024–25 season stood at 10.45%, a decline from previous years’ 10.7–10.9%. Uttar Pradesh saw the steepest fall (0.6 percentage points), while Maharashtra and Karnataka recorded marginal changes.
In UP, varietal replacement is underway, particularly in central and eastern regions. New climate-resilient and disease-resistant cane varieties are being tested under the ISMA–ICAR initiative, with early trials indicating 2–3 promising alternatives for subtropical zones.
Urgent Call for Ethanol Price Revision
Despite a ₹15/quintal hike in the Fair and Remunerative Price (FRP) of sugarcane for the 2025–26 season (now at ₹355/quintal), ethanol prices remain unchanged since 2022–23. Currently:
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B-heavy molasses ethanol: ₹60.73/litre
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Juice-based ethanol: ₹65.61/litre
In contrast, production costs exceed these rates, with B-heavy ethanol costing ₹66.09/litre and juice-based ethanol around ₹70.70/litre. Based on a standard return on investment (6–8%), ISMA estimates the ideal ethanol pricing should be:
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Juice-based ethanol: ₹76.33/litre
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B-heavy ethanol: ₹70.65/litre
ISMA has submitted these revised calculations to the government, urging a fair pricing mechanism linked to rising FRPs to ensure economic viability for mills.
₹40,000 Crore Investment at Risk as Feedstock Mix Shifts
Over the years, sugar mills have invested ₹40,000 crore in ethanol production facilities. Yet, the share of sugar-based ethanol in the EBP has dropped from over 70% to under 30%, while grain-based ethanol now constitutes 72%.
This shift threatens the economic viability of sugar mills, which depend on ethanol to diversify income and reduce dependence on volatile sugar markets. ISMA is urging the government to restore a 50:50 feedstock ratio to protect this massive investment and support farmer payments.
Balancing Sugar and Ethanol: Key to Industry Sustainability
Ballani emphasized that the industry must strike a sustainable balance between sugar and ethanol production. In earlier years, the absence of a strong ethanol ecosystem led to delayed payments and mounting arrears due to overproduction and falling prices. Ethanol, now, serves as a critical financial cushion for mills.
To safeguard farmer welfare and ensure sector-wide sustainability, both sugar and ethanol production must be equally supported through balanced policies and fair pricing mechanisms.
