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ISMA Warning: Ethanol Cuts and Frozen Sugar Prices Threaten Farmer Payments

The Indian Sugar and Bio-Energy Manufacturers Association has issued a serious warning about the sugar industry's financial stability. Ethanol allocations from sugar-based sources have been drastically reduced to just 28% of total requirements. Meanwhile, ethanol procurement prices haven't kept pace with rising production costs, creating significant financial gaps. These factors combined could lead to delayed payments to farmers and threaten the entire sugar sector's viability.

Key Points: ISMA Warns Ethanol Cuts May Delay Farmer Payments Amid Sugar Glut

  • Ethanol allocation from sugar feedstocks slashed to just 28% of total requirement
  • Sugar diversion to ethanol reduced, creating excess sugar stocks
  • Ethanol production costs exceed procurement prices by Rs 5 per litre
  • Sugar MSP frozen since 2019 despite rising production costs
2 min read

ISMA warns of payment delays to farmers as ethanol cuts & frozen sugar prices threaten industry stability

ISMA warns ethanol allocation cuts and frozen sugar prices could cause payment delays to farmers, surplus sugar stocks, and financial stress in sugar industry.

"Timely government intervention is crucial to safeguard farmer welfare, maintain industry stability, and support India's green energy and Net Zero goals - ISMA"

New Delhi, October 29

The Indian Sugar and Bio-Energy Manufacturers Association (ISMA) has raised concerns over the drastic reduction in ethanol allocation from sugar-based feedstocks, warning it could lead to surplus sugar stocks, underutilized distilleries, and delayed payments to farmers in the 2025-26 sugar season.

ISMA said only 289 crore litres of ethanol have been allocated from sugar-based feedstocks under the Ethanol Supply Year 2025-26, just 28 per cent of the total requirement, compared to 72 per cent (760 crore litres) from grain-based sources. The association noted that this imbalance could reduce sugar diversion to ethanol and create excess sugar stocks, aggravating liquidity issues for mills.

ISMA statement says "Under the Ethanol Supply Year (ESY) 2025-26, only 289 crore litres of ethanol have been allocated from sugar-based feedstocks, accounting for just 28% of the total requirement, while grain-based ethanol has been allocated 72% (760 crore litres)."

While the Fair and Remunerative Price (FRP) of sugarcane has increased by 16.5 per cent since 2022-23, ethanol procurement prices from sugarcane juice and B-heavy molasses remain unchanged, resulting in an unviable pricing gap of about Rs 5 per litre. ISMA warned that this cost-price misalignment is making ethanol production from sugarcane uneconomical and affecting timely cane payments.

"The cost of production of ethanol stands at Rs 66.09 per litre from B-heavy molasses and Rs 70.70 per litre from sugarcane juice. However, the current procurement prices of Rs 60.73 and Rs 65.61 per litre, respectively, result in an unviable pricing gap of around Rs 5 per litre," added the ISMA statement."

The body also pointed out that the Minimum Selling Price (MSP) of sugar has remained static at Rs 31/kg since 2019, even as the cost of production has risen to Rs 40.24/kg. It said domestic sugar prices have declined and are likely to fall further by December, potentially leading to mounting cane arrears and financial stress across the sector.

ISMA has urged the government to rebalance ethanol allocation in line with NITI Aayog's roadmap, revise ethanol prices to reflect current costs, and increase the sugar MSP in sync with higher FRP and production costs. It also sought early export policy announcements for 2025-26 to manage surplus stocks and ensure liquidity.

"Timely government intervention is crucial to safeguard farmer welfare, maintain industry stability, and support India's green energy and Net Zero goals," ISMA said.

- ANI

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Reader Comments

P
Priya S
Why such a big shift to grain-based ethanol? Sugar industry has invested so much in distilleries. This sudden policy change will hurt everyone - from factory workers to farmers. Hope government reconsiders.
M
Michael C
As someone working in renewable energy sector, I understand the need for balanced approach. But completely shifting away from sugar-based ethanol when mills have already made huge investments seems counterproductive. The cost calculations clearly show the gap.
A
Ananya R
My uncle is a sugarcane farmer in Karnataka. Last year payments were delayed by 4 months. If this continues, many farmers will switch to other crops. Sugar MSP hasn't changed since 2019 while costs keep rising. This is unsustainable. 😔
S
Sarah B
While I appreciate the government's push for green energy, the transition should be gradual and considerate of existing infrastructure. Sugar industry supports millions of livelihoods. A sudden policy shift could have devastating consequences.
V
Vikram M
The numbers speak for themselves - production cost Rs 40/kg but MSP only Rs 31/kg? How can any industry survive like this? Government needs to either increase MSP or allow exports to clear surplus stock. Farmers can't bear the brunt of policy indecision.
K
Kavya N
This is exactly what happened in 2018-19 when

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