India's sugar industry is sounding the alarm over a looming financial crisis, driven by ambiguity surrounding the minimum support price (MSP) for sugar and ethanol, coupled with a massive stockpile that is blocking crucial funds. The National Federation of Cooperative Sugar Factories (NFCSF) has highlighted a precarious situation where mills are grappling with mounting interest burdens as the current crushing season progresses.
Record Crushing and Production Figures
According to a report released by the NFCSF on December 1, the scale of the current season is substantial. A total of 424 sugar mills across the country have crushed 486 lakh tonnes (LTs) of sugarcane till November 30. This marks a significant increase from the 334 LTs processed during the same period last year. This heightened activity has yielded 41.3 lakh tonnes of new sugar, compared to last year's 27.6 LTs. The average sugar recovery rate also improved slightly to 8.5%, up from 8.2% a year ago.
Prakash Naiknavare, Managing Director of NFCSF, provided a stark forecast. He anticipates gross sugar production at the end of the 2023-24 season to reach 350 lakh tonnes. Of this, an estimated 35 LTs is expected to be diverted for ethanol production, resulting in a net sugar availability of 315 lakh tonnes. The bulk of this production will come from three states: Maharashtra (110 LTs), Uttar Pradesh (105 LTs), and Karnataka (55 LTs).
The Root of the Crisis: Massive Closing Stock
The core of the impending problem lies in the closing stock balance. After accounting for domestic consumption of 290 LTs and an opening stock of 50 LTs, the season is projected to end with a staggering closing balance of about 75 lakh tonnes of sugar in mills' godowns. Naiknavare warned that this huge inventory translates into blocked capital and a severe interest burden for sugar mills, crippling their financial health.
To stabilise the domestic market, the NFCSF has urgently requested the central government to permit an additional export of 10 lakh tonnes of sugar, over and above the already-announced quota of 15 LTs. "This will not only help stabilise the domestic sugar prices but also not adversely impact the current low international sugar prices," Naiknavare stated.
Stagnant MSP and Rising Costs Squeeze Mills
Compounding the stock issue is a severe cost-price disparity. The industry points out that the sugar MSP has remained frozen at Rs 3,100 per quintal since the 2018-19 season. In stark contrast, the Fair and Remunerative Price (FRP) for sugarcane has risen from Rs 275 per quintal in 2018-19 to Rs 355 for 2025-26, with other overheads also seeing considerable hikes.
Consequently, the current sugar MSP fails to reflect the increased cost of production, which now stands at Rs 4,024.49 per quintal. This means mills are selling sugar at a price significantly below their production cost. Furthermore, oil marketing companies are offering ethanol prices that are Rs 5 to Rs 6 lower than the actual production cost, adding another layer of financial strain.
Harshvardhan Patil, President of NFCSF, emphasised the need for a corrective MSP. "To cope with this situation, we've urged the Centre to revise the current sugar MSP to Rs 41 per kg," he said. Patil noted that even with this hike, the revenue share for Indian farmers would be 75-80%, which is still higher than the 60-65% seen in major producers like Brazil and Thailand.
Naiknavare also highlighted an anomaly in ethanol allocation. While the country has 513 functional distilleries with an annual capacity of 1,953 crore litres, the allocation for the sugar sector (from molasses) is a mere 288.60 crore litres. The balance of 759.80 crore litres has been allocated to grain-based distilleries. "This anomaly in allocation policy not only needs to be rectified but the long-awaited upward revision in sugar-based ethanol prices also needs to be applied on priority," he asserted, adding that the federation is continuously pursuing these matters with government authorities.
