Various industry bodies in India are urging the government for urgent relief, stating that the sugar sector is heading towards a financial crisis and require government intervention to ensure smooth operations.
The National Federation of Cooperative Sugar Factories (NFCSF) has written to the Department of Food and Public Distribution (DFPD), urging that immediate measures be taken to sustain the industry.
In its letter, NFCSF highlighted the mounting challenges facing the sector as the 2024-25 sugar season (SS) begins. The federation stated as the 2024-25 SS begins, we face significant challenges due to a growing inventory and increased financial strain from rising input costs. The season started with an opening stock of 80 lakh tonnes (LMT) and an estimated production of 325 LMT before ethanol diversion. With domestic consumption projected at 290 LMT, we are left with an inventory of approximately 115 LMT, 60 LMT of which constitutes usable stock beyond normative requirements of 55 LMT. Furthermore, the Government has increased the sugarcane price by 8% to Rs. 3,400 per tonne for the 2024-25 season. While this is a positive step for supporting sugarcane farmers, but it also requires the sugar industry to generate over Rs. 1.5 lakh crore in funds to sustain operations. Of this amount, 75% will go toward timely payments to farmers, with the remaining 25% allocated to operational and financing costs.
The NFCSF also raised concerns about the industry’s financial stability, and stated that given the current domestic sugar price, the non-revision of ethanol prices despite of increase in FRP of sugarcane, reduced ethanol contributions from the sugar sector due to jerk received in December 2023, and anticipated record sugar production in sugar season 2025-26, the sector is heading toward a critical financial challenge.
To address these challenges, NFCSF is urging the government to raise the minimum selling price (MSP) of sugar to ensure production costs are met. The industry body claims that the current production cost of sugar stands at Rs. 41.66 per kilogram. The sugar MSP was last revised in the 2018-19 season to Rs. 31 per kg. Given that 80-85% of total revenue is derived from sugar sales, raising the MSP is crucial for the sector’s financial stability
NFCSF also called for an increase in the ethanol price for B-heavy molasses and cane juice, as well as a higher allocation of ethanol from the sugar sector. The federation stressed that the The Ethanol Supply Year (ESY) 2024-25 is pivotal for the Ethanol Blending Program (EBP) to reach the 20% blending target. Against a requirement of 940 crore litres, OMCs have allocated 837 crore litres of ethanol, 37% (317 crore litres) of which is from the sugar industry, equating to a diversion of approximately 40 LMT of sugar. However, despite the increased FRP, the price of ethanol derived from B-heavy molasses and cane juice have not been adjusted, undermining financial viability.”
“The sugar sector’s ethanol contribution has seen a significant drop due to the jerk received in December 2023, from 83% in ESY 2021-22 to 37% currently. To maintain the industry’s contribution toward the EBP goals, Ethanol prices derived from cane juice/syrup and B-heavy molasses should be revised to Rs. 73.14/litre and Rs. 67.70/litre, respectively. Additionally, increased allocation for Ethanol production from the sugar sector is needed to balance the financial impact of sugarcane price hikes and ensure sectoral sustainability,” NFCSF further added in a letter.
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