New Delhi: India’s sugar industry is facing mounting financial pressure despite substantial investments in ethanol production, as rising sugarcane costs, stagnant ethanol prices and excess distillery capacity squeeze mill profitability. Deepak Ballani, Director General of the Indian Sugar and Bio-Energy Manufacturers Association (ISMA), has highlighted the need for policy support to protect sugar mills, ensure timely payments to farmers and sustain the country’s ethanol blending programme.
In an interview with The Economic Times, Ballani highlighted the growing mismatch between production costs and government-set ethanol prices. Sugar mills have invested heavily in distilleries to support India’s ethanol blending programme, but returns on these investments have come under pressure as input costs have increased without corresponding revisions in procurement prices.
The problem extends beyond pricing. India has developed substantial ethanol manufacturing capacity using sugarcane and grain-based feedstocks. However, available capacity exceeds current demand, leaving some plants underutilised and raising concerns about the financial viability of investments made by sugar companies. The industry has called for a clearer roadmap to expand ethanol demand through higher blending levels, flex-fuel vehicles and emerging applications such as sustainable aviation fuel.
Rising sugarcane procurement costs have added to the pressure. The Fair and Remunerative Price payable to farmers has increased over recent years, while ethanol prices for several sugar-based feedstocks have not kept pace with rising costs. ISMA has also sought a revision in the minimum selling price of sugar, arguing that better alignment between production costs and market realisations is essential for the financial health of mills and timely settlement of farmers’ dues.
The policy challenge has become more complex following the government’s October 2026 decision to exclude ethanol produced from sugarcane juice, sugar syrup and B-heavy molasses from the latest procurement tender for the 2026-27 ethanol supply year. Oil marketing companies have invited bids for 11 billion litres of ethanol from eligible feedstocks. The move has created uncertainty for sugar mills that invested in distillery capacity to support the national blending programme.
For ISMA, ethanol remains an important avenue for diversifying revenue, managing surplus sugar stocks and supporting payments to sugarcane farmers. However, the industry believes that predictable pricing, stable procurement policies and additional demand are essential to make these investments financially sustainable.
Whether ethanol can stabilise India’s sugar sector will depend on aligning energy policy with the economic realities of sugar mills and farmers. A balanced approach could help improve distillery utilisation, strengthen the financial position of sugar companies and support the country’s broader renewable energy ambitions.
