The credit rating agency ICRA has expressed concerns over the nearly 7.7% increase in the fair and remunerative price (FRP) of sugarcane by the central government, stating that it is anticipated to impact the profitability of sugar mills, reported Economic Times.
Conversely, the sugar industry is optimistic, viewing the hike in sugarcane prices as a means to enhance the competitiveness of sugarcane in comparison to maize and rice.
The upward adjustment of FRP from Rs. 315 per quintal to Rs. 340 per quintal is expected to result in an additional payment exceeding Rs. 10,000 crores to the 5 crore cane farmers through the sugar industry.
The Indian Sugar Mills Association (ISMA), a representative body of the industry, has welcomed the FRP increase, asserting that it will assist farmers in meeting rising cultivation costs and maintaining the competitiveness of sugarcane against other crops like rice and maize. ISMA anticipates an additional payment of over Rs. 10,000 crores to cane farmers through the sugar industry.
In response to the FRP adjustment, ISMA has called for proportional increases in sugar and ethanol prices.
Analysts in the sector project potential reductions in the profits of sugar mills if sugar prices hover around Rs. 36/kg. Girishkumar Kadam, Senior Vice President & Group Head, ICRA said, “With the recent decision of the government regarding increase in FRP of sugarcane for Sugar Year 2025 (October 2024-September 2025), the cost of sugar production is likely to increase by about Rs.2.4/kg for the states following FRP such as Maharashtra and Karnataka. ICRA expects the profitability of sugar mills in Maharashtra and Karnataka to moderate by 80-100 bps given the domestic sugar prices remain at Rs. 36-36.5/kg.”
