As crushing season nears close, mills seek MSP Revision and Ethanol push to sustain growth and farmer payments

India’s sugar industry is closing the 2025–26 crushing season on a strong production note, but rising costs, liquidity pressures, and policy bottlenecks threaten to undercut its momentum. As of March 31, 2026, total sugar production reached 272.31 lakh tons—up nearly 9 per cent from 248.78 lakh tons during the same period last year—ensuring comfortable domestic availability even as the season enters its final phase.

Yet beneath the headline growth lies a sector navigating tightening margins and structural pressures.

Production Surges, Even as Mills Wind Down

With only 56 mills still operational nationwide—down sharply from 95 at this stage last year—the season is clearly in its closing stretch. The production surge has been driven largely by western and southern states.

Maharashtra, the country’s top producer, recorded a sharp jump to 99.3 lakh tons, up from 80.26 lakh tons last year. Karnataka followed with 47.90 lakh tons, compared to 39.94 lakh tons in the previous season. Uttar Pradesh, India’s second-largest producer, maintained stable output at 87.5 lakh tons, matching last year’s levels.

Meanwhile, smaller producing regions such as Gujarat and others saw marginal declines, reflecting regional variability in cane availability and recovery rates.

The industry is also anticipating a limited “special season” restart in parts of southern India. Select mills in Karnataka and Tamil Nadu are expected to resume operations between June and September, providing a marginal extension to crushing activity.

Strong Output Masks Deepening Financial Strain

Despite robust production, sugar mills are under increasing financial pressure. Rising cane procurement costs and stagnant ex-mill sugar prices have squeezed margins, leading to a buildup in farmer dues.

As of mid-February, cane arrears surged to Rs 16,087 crore, up from Rs 14,038 crore a year earlier—a trend that underscores growing stress across the value chain.

Industry stakeholders are now calling for an urgent upward revision of the Minimum Selling Price (MSP) of sugar. Without it, mills warn, liquidity constraints could worsen, delaying payments to farmers and destabilizing the market.

A calibrated MSP revision, aligned with current cost structures, is seen as a critical intervention—one that can restore financial viability without adding fiscal burden on the government.

Ethanol Emerges as Strategic Lever

At the same time, the sector is increasingly looking toward ethanol blending as both a buffer and a growth engine. With installed ethanol production capacity estimated at around 2,000 crore litres—including grain-based facilities—there is significant headroom for expansion.

Rising crude oil prices and evolving geopolitical dynamics have added urgency to this shift. Industry leaders are advocating for a faster transition beyond the current E20 blending target, proposing a roadmap toward higher blends such as E22, E25 and eventually E85/E100.

However, scaling ethanol adoption will require coordinated policy support, including:

Accelerated rollout of flex-fuel vehicles (FFVs)

Rationalization of GST on FFVs

Timely revisions in ethanol pricing to reflect rising cane costs

Such measures could not only reduce India’s oil import dependence but also create a more stable revenue stream for sugar mills.

Consumption Headwinds Add to Pressure

Adding another layer of complexity, recent LPG supply disruptions have led to reduced operations in segments of the food service industry, dampening sugar consumption. This demand-side softness is compounding the pricing pressure already faced by mills.

Policy Timing Will Be Critical

The coming months will be pivotal for India’s sugar sector. While production gains have strengthened supply security, the sustainability of the industry hinges on timely and targeted policy action.

An aligned approach—combining MSP revision, ethanol policy acceleration, and demand stabilization—could unlock the sector’s full potential. More importantly, it would ensure that the benefits of a strong production cycle translate into financial stability for mills and timely payments for millions of sugarcane farmers.

As the season concludes, the message from the industry is clear: growth has been achieved, but resilience will depend on reform.