The National Federation of Cooperative Sugar Factories (NFCSF) has urgently appealed to the Indian government to address a looming financial crisis threatening the sugar industry.
In a letter to the Union Food Secretary, the NFCSF highlighted pressing issues in the sector as the 2024-25 sugar season begins. Key concerns include mounting production costs, substantial sugar stockpiles, and recent policy changes that have exacerbated the sector’s financial distress.
The NFCSF is calling for immediate government intervention to stabilize the industry and safeguard the livelihoods of millions who rely on it.The NFCSF estimates the nation will produce 325 lakh metric tonnes of sugar this season, while domestic consumption is projected at 290 lakh metric tonnes.
This leaves an estimated surplus of 115 lakh metric tonnes of sugar in storage across the country. The federation warns that such a large stockpile places immense financial strain on the industry, especially as the government recently raised the Fair and Remunerative Price (FRP) for sugarcane to Rs 3,400 per tonne—a move intended to support farmers but one that significantly increases operational costs for sugar mills.
To keep operations running and meet payment obligations to farmers, the industry will need an estimated Rs 1.5 lakh crore this season, with 75% allocated for farmer payments and the remaining 25% for factory operations.
Compounding these challenges, the NFCSF noted that the government has not increased the minimum selling price (MSP) of sugar since the 2018-19 season, when it was set at Rs 31 per kilogram. Meanwhile, the actual production cost of sugar has climbed to Rs 41.66 per kilogram, creating unsustainable losses for sugar producers who rely on sugar sales for 80-85% of their revenue.
The NFCSF has called for an urgent hike in the MSP to bring it closer to production costs, warning that without this adjustment, the industry risks further destabilization.
The NFCSF also highlighted the importance of ethanol production as a revenue source for the sugar sector. Despite an increased FRP, the government has not raised the price of ethanol derived from B-heavy molasses and sugarcane juice in over a year, reducing the sector’s profitability.
The NFCSF proposes that the price of ethanol from sugarcane juice be raised to Rs 73.14 per liter and from B-heavy molasses to Rs 67.70 per liter to help the industry meet the Ethanol Blending Program’s 20% blending target by 2024-25.
They also seek increased allocations for ethanol production from the sugar sector, especially following recent restrictions on ethanol use by the government.