India Moves to Tackle Sugar Surplus with Price Hike and Ethanol Push

The Indian government is planning new steps to manage a looming sugar surplus. A formal policy announcement is expected in January 2025. The measures aim to prevent a domestic sugar glut. They also seek to ensure timely payments to sugarcane farmers.

Officials are responding to industry warnings about falling prices and rising stockpiles. The strategy focuses on two main areas. It includes a potential hike in the government-set sugar price. It also involves pushing more sugarcane towards ethanol production.

Government Considers Key Measures to Stabilize Market

Food Secretary Sanjeev Chopra confirmed the government is actively working on solutions. The goal is to prevent a major buildup of sugar stocks. He stated the decisions will ensure farmers receive payments on time.

The 2025-26 sugar season is projected to see gross production of 34.3 million tonnes. This high output risks depressing market prices further. Industry bodies have formally requested an increase in the sugar Minimum Sale Price (MSP). The MSP has remained at ₹31 per kilogram since February 2019.

The industry is asking for the MSP to be raised to at least ₹41 per kg. According to the Indian Sugar & Bio-Energy Manufacturers Association, the average production cost is now ₹41.66 per kg. Current sugar prices have dropped below this cost, straining mill finances.

Ethanol Diversion and Muted Demand Compound Challenge

Boosting ethanol production is a central part of the plan. The government may raise the share of sugarcane diverted to ethanol from 28% to 50%. This would reduce the amount of cane turned into sugar. It directly addresses the core issue of oversupply.

Domestic sugar consumption has recently softened. It fell to 28.1 million tonnes in the 2024-25 season. A study by industry body ISMA indicates demand will grow slowly. It projects a mere 1.5-2.0% annual growth over the next five years.

This muted consumption outlook is keeping pressure on prices. Most sugar demand now comes from institutional buyers, not households. The combination of high production and slow demand creates a significant challenge for the sector’s financial health.

The government’s impending decision on the sugar surplus is critical for millions of farmers. It will shape the industry’s shift towards biofuels and determine the economic stability of India’s sugar heartlands for the next season.

Thought you’d like to know

What is causing India’s sugar surplus?

A combination of high sugarcane production and slowing domestic consumption is creating a surplus. Projections for the 2025-26 season estimate output of 34.3 million tonnes against weaker demand growth.

How will a higher MSP help?

Increasing the Minimum Sale Price ensures sugar mills receive a fair price from buyers. This improves their cash flow, which is essential for making timely payments to the farmers who supply the sugarcane.

What is the link between sugar and ethanol?

Sugarcane can be processed to make either sugar or ethanol. Diverting more cane to ethanol production reduces the sugar output, helping to balance supply and demand while supporting India’s green fuel goals.

Why are farmer payments at risk?

When sugar prices fall below the cost of production, mills operate at a loss. This financial stress leads to delays in paying farmers for their sugarcane, accumulating dues that hurt rural incomes.

When will the new policy be announced?

A formal government decision on these measures is expected in January 2025. Officials are currently finalizing the strategy based on industry consultations and production data.