Karnataka's sugar industry is bracing for a massive financial blow. Chief Minister Siddaramaiah has issued a new order that mandates higher payments to sugarcane farmers. This decision is expected to push sugar mills into deep losses.
The Chief Minister's Directive
On November 8, 2025, Chief Minister Siddaramaiah signed an official order. This order requires all sugar mills in Karnataka to pay farmers an additional Rs 400 per tonne of sugarcane. This extra amount is over and above the existing Fair and Remunerative Price (FRP). The FRP is the minimum price set by the central government to protect farmers' interests.
Financial Impact on Sugar Mills
The immediate effect of this order is staggering. Industry estimates suggest that sugar mills across Karnataka could face losses totaling Rs 4,000 crore. This huge sum represents the additional financial burden imposed by the increased payment to farmers.
Mills are now scrambling to assess their financial health. Many are already operating on thin margins due to fluctuating sugar prices and high production costs. The new payment requirement adds significant pressure to their balance sheets.
Reactions from the Industry
Industry representatives have expressed serious concerns. They argue that the sudden hike in sugarcane prices is unsustainable. Mills may struggle to absorb these extra costs without passing them on to consumers or cutting other expenses.
Some mill owners fear that this move could lead to operational shutdowns. Smaller mills, in particular, might find it impossible to comply with the new payment structure. This could have ripple effects on employment and local economies dependent on the sugar sector.
Background on FRP and State Policies
The Fair and Remunerative Price (FRP) is a central government mechanism. It ensures that sugarcane farmers receive a minimum price for their crop. States often announce State Advised Prices (SAP) that are higher than the FRP to further support farmers.
Karnataka's latest order effectively acts as a state-level price enhancement. While aimed at benefiting farmers, it places a heavy burden on mill operators. The timing of this order, coming during the peak crushing season, adds to the industry's challenges.
Looking Ahead
The sugar mills are now evaluating their options. Some may seek relief through government subsidies or revised payment schedules. Others might consider legal avenues to challenge the order's implementation.
Farmers, on the other hand, welcome the increased payment. They argue that higher prices are necessary to cover rising input costs and ensure fair compensation for their labor.
The Karnataka government will need to balance these competing interests. Ensuring the survival of sugar mills while supporting farmer livelihoods remains a complex task. The coming months will reveal how this policy plays out on the ground.
