Indian Sugar Industry Faces Crisis Due to Ethanol Allocation Imbalance

The Indian Sugar and Bio-Energy Manufacturers Association (ISMA) has warned of a crisis in the Indian sugar industry due to a drastic reduction in ethanol allocation from sugar-based feedstocks. The association has noted that only 289 crore litres of ethanol have been allocated from sugar-based feedstocks under the Ethanol Supply Year 2025-26, which is just 28% of the total requirement, compared to 72% (760 crore litres) from grain-based sources. This imbalance could lead to surplus sugar stocks, underutilized distilleries, and delayed payments to farmers in the 2025-26 sugar season.

Key Takeaways:

• The Indian Sugar and Bio-Energy Manufacturers Association (ISMA) has raised concerns over the drastic reduction in ethanol allocation from sugar-based feedstocks, warning it could lead to surplus sugar stocks, underutilized distilleries, and delayed payments to farmers in the 2025-26 sugar season.
• Only 289 crore litres of ethanol have been allocated from sugar-based feedstocks under the Ethanol Supply Year 2025-26, which is just 28% of the total requirement, compared to 72% (760 crore litres) from grain-based sources.
• The association noted that this imbalance could reduce sugar diversion to ethanol and create excess sugar stocks, aggravating liquidity issues for mills.
• The Fair and Remunerative Price (FRP) of sugarcane has increased by 16.5% since 2022-23, but ethanol procurement prices from sugarcane juice and B-heavy molasses remain unchanged, resulting in an unviable pricing gap of about Rs 5 per litre.
• The cost of production of ethanol stands at Rs 66.09 per litre from B-heavy molasses and Rs 70.70 per litre from sugarcane juice, but the current procurement price is Rs 60.73 per litre and Rs 65.61 per litre, respectively, resulting in an unviable pricing gap of around Rs 5 per litre.
• The Minimum Selling Price (MSP) of sugar has remained static at Rs 31/kg since 2019, even as the cost of production has risen to Rs 40.24/kg, potentially leading to mounting cane arrears and financial stress across the sector.
• ISMA has urged the government to rebalance ethanol allocation in line with NITI Aayog's roadmap, revise ethanol prices to reflect current costs, and increase the sugar MSP in sync with higher FRP and production costs.

Statistics:

• 289 crore litres: ethanol allocation from sugar-based feedstocks under the Ethanol Supply Year 2025-26
• 28%: percentage of total ethanol requirement met by sugar-based feedstocks
• 760 crore litres: ethanol allocation from grain-based feedstocks under the Ethanol Supply Year 2025-26
• 72%: percentage of total ethanol requirement met by grain-based feedstocks
• Rs 5 per litre: unviable pricing gap between ethanol production cost and procurement price
• Rs 66.09 per litre: cost of production of ethanol from B-heavy molasses
• Rs 70.70 per litre: cost of production of ethanol from sugarcane juice
• Rs 60.73 per litre: current procurement price of ethanol from sugarcane juice
• Rs 65.61 per litre: current procurement price of ethanol from B-heavy molasses
• Rs 31/kg: Minimum Selling Price (MSP) of sugar
• Rs 40.24/kg: current cost of sugar production

Sources:

• Indian Sugar and Bio-Energy Manufacturers Association (ISMA)
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