Is India’s sugar industry in trouble as prices dip below production costs?

New Delhi: The Indian Sugar & Bio-energy Manufacturers Association (ISMA) has flagged that sugar prices in key producing states are currently below production costs, indicating the need for better price realisation across the sector.

ISMA Director General Deepak Ballani said ex-mill sugar prices in Uttar Pradesh are currently around ₹41–₹41.50 per kg, while in Maharashtra they are close to ₹39 per kg. However, the estimated production cost stands at about ₹42 per kg, creating pressure on sugar mills.

Mills facing pressure from low realisation

According to ISMA, the gap between production costs and selling prices is affecting the financial health of sugar mills. The association has highlighted that unless mills receive adequate realisation from sugar sales, timely payments to farmers could be impacted.

Ballani said there is a clear need for improved pricing in the market, especially to ensure that mills can meet obligations linked to sugarcane procurement and the Fair and Remunerative Price (FRP) system.

Despite the cost-pressure at the production level, retail sugar prices are currently hovering around ₹46.50–₹47 per kg. ISMA noted that sugar inflation has remained relatively stable over the past decade compared to other commodities.

The industry also pointed out that export restrictions have not significantly disrupted domestic price stability. On availability, ISMA said it expects closing sugar stocks of around 42–43 lakh tonnes at the end of the 2025–26 sugar season, compared to an opening stock of about 50 lakh tonnes in the previous cycle.

The association added that there is no immediate concern regarding sugar supply, with fresh arrivals expected in the market from the third week of October.

Ethanol pricing emerges as key concern

The sugar industry has also raised concerns over ethanol procurement prices, stating that production costs have increased significantly in recent years.

ISMA said that since the last ethanol price revision, sugarcane costs alone have risen by nearly 20 per cent due to higher Fair and Remunerative Prices, along with rising inflation, conversion costs, and financing expenses.

The industry has urged the government to align ethanol procurement prices with rising input costs to ensure the long-term sustainability of sugar mills and distilleries.

ISMA also welcomed the launch of India’s first flex-fuel vehicle by Maruti Suzuki, stating that it could boost ethanol consumption and reduce dependence on imported crude oil.

Additionally, the association has advocated the adoption of ethanol-based cooking stoves as an alternative to LPG, arguing that it could help reduce import dependency and strengthen energy security.
(With ANI inputs)