Reduced ethanol procurement: ISMA warns of financial strain, delay in payment to sugarcane farmers

NEW DELHI: The country’s top sugar industry body Wednesday cautioned the govt that the sharp cut in ethanol procurement from sugar mills could trigger financial stress and delay payments to cane farmers in the 2025-26 supply year, starting next month.

It also warned this could lead to surplus sugar stocks and underutilised distillery capacities.Sugar mills have been allocated only 289 crore litre of ethanol — just 28% of the total requirement of 1,050 crore litre — while grain-based distilleries have received orders for 760 crore litre, accounting for 72% of the total, said senior officials of the Indian Sugar and Bio-Energy Manufacturers Association (ISMA).In a media interaction, they said the allocation falls short despite the sugar sector investing more than Rs 40,000 crore to build ethanol capacity exceeding 900 crore litre. “There has been some kind of a policy gap and planning gap as far as oil marketing companies (OMCs) are concerned, which has led to the abnormality and disruption in allotment of ethanol for the sugar industry,” ISMA director general Deepak Ballani said.

ISMA said the ethanol blending programme was launched to help the sugar industry from cyclical oversupply and prevent arrears to cane growers. But policy shift towards grain-based ethanol, particularly from maize, has disrupted that plan and it is likely to impact the payment to farmers, if necessary steps are not taken, it said.It has demanded increased 50% allocation for sugar-based feedstocks and expects about 150 crore litre in a supplementary tender for the 2025-26 season.It has also called for an increase in the minimum selling price (MSP) for sugar, which has been unchanged at Rs 31 per kg since Feb 2019, even as the govt-set fair and remunerative price (FRP) for cane has risen 29% to Rs 355 per quintal. Uttar Pradesh has raised its state advisory price (SAP) by Rs 30 per quintal for the 2025-26 marketing year (Oct-Sept). This has further squeezed margins of mills.ISMA vice president Niraj Shirgaokar said the cost of sugar production has risen to Rs 40.24 per kg, while mentioning that falling market prices could drop below production costs by Dec, which will impact financials of sugar mills adversely. “It will be difficult to make the cane payments to farmers, unless sugar mills get proper revenue realisation,” he added.ISMA urged the govt to align ethanol allocation with Niti Aayog’s roadmap, revise ethanol prices to match current costs and raise the sugar MSP in line with higher FRP and production expenses.