India's sugar industry is actively lobbying the central government for crucial policy interventions to address a significant surplus stock and ensure the financial health of sugar mills. The key demands include an increase in the Minimum Selling Price (MSP) of sugar and a higher procurement price for ethanol derived from sugarcane juice and B-heavy molasses.
Addressing the Stockpile and Mill Liquidity
The industry, represented by the Indian Sugar Mills Association (ISMA), has formally communicated its requests to the Union Food and Consumer Affairs Ministry. The primary concern is the management of an estimated surplus stock of 4.1 million tonnes at the end of the current 2023-24 season in September. This surplus is exerting downward pressure on domestic sugar prices, squeezing mill revenues.
To provide immediate relief and improve cash flow for mills, ISMA has proposed an increase in the MSP of sugar. The current MSP of Rs 3,100 per quintal was set in February 2019 and has remained unchanged since. The industry argues that production costs have risen substantially over the past five years, making the current MSP unsustainable. A revised MSP would help mills clear outstanding dues to sugarcane farmers more promptly.
Boosting the Ethanol Blending Roadmap
The second major demand focuses on the Ethanol Blending Programme (EBP), a strategic government initiative aimed at reducing crude oil imports and cutting carbon emissions. The industry is seeking an increase in the price at which oil marketing companies (OMCs) procure ethanol.
Specifically, ISMA has requested the government to raise the procurement price for ethanol produced from sugarcane juice to Rs 73 per litre and from B-heavy molasses to Rs 65-66 per litre. This price incentive is considered vital for encouraging sugar diversion towards ethanol production, which in turn helps manage sugar surplus. The industry warns that without a remunerative price, the diversion will be less attractive, jeopardizing the government's target of achieving 20% ethanol blending with petrol (E20) by 2025-26.
Strategic Diversion and Future Outlook
The government's policy of diverting sugarcane for ethanol production has been a key tool for balancing sugar supply. For the 2023-24 season, about 2.2 million tonnes of sugar were diverted for ethanol. For the upcoming 2024-25 season, the government has already authorized the diversion of 1.7 million tonnes of sugar. However, the industry contends that a supportive ethanol pricing policy is essential to make this diversion economically viable for mills.
These demands come at a critical juncture. A favorable decision on both MSP and ethanol pricing would achieve multiple objectives: it would ensure timely payments to farmers, improve the liquidity of sugar mills, help manage domestic sugar inventories, and provide a strong impetus to the national ethanol blending program. The government's response will significantly shape the operational and financial landscape of India's crucial sugar sector in the coming months.
