‘With factories starting early for the next season, fresh sugar will enter market 10-15 days earlier than usual, and sugar price are expected to remain affordable in near term.’
IMAGE: Sugar mill workers load harvested sugarcane in Sangli district, Maharashtra. Photograph: Rajendra Jadhav/Reuters/Rediff Archive
Key Points
- ‘Sugar prices have eased down since last 3-4 days and are expected to further cool down down.’
- ‘While the MSP of sugar has remained frozen at ₹31 per kg since 2019, production costs have escalated beyond ₹43 per kg.’
- ‘Domestic availability will remain ample at stable, affordable prices throughout the festive season.’
The sugar price story is no longer just about what consumers pay at the shop. It is also about what it costs to produce that sugar.
Sugar mills are caught between two competing pressures.
They have to pay farmers more for sugarcane, while consumers expect sugar to remain affordable.
The Fair and Remunerative Price (FRP) of cane has risen steadily over the years and will reach ₹365 per quintal in the 2026–27 season. But sugar’s Minimum Selling Price has remained stuck at ₹31 per kg since 2019.
The industry says this gap has become increasingly difficult to sustain, with the cost of producing sugar now crossing ₹43 per kg.
If mills cannot recover their costs, the pressure could eventually move back to farmers through delayed payments or undermine the financial health of the industry.
Yet consumers have little interest in the industry’s cost calculations when retail prices rise.
For them, the immediate question is: How high can sugar prices go, and for how long?
The government has stepped in with stock limits and other measures to cool the market.
The industry says prices have already started easing and expects fresh sugar to arrive earlier this year as mills begin the next crushing season ahead of schedule.
So, is the current spike only a temporary squeeze before new supplies arrive — or is it a warning that the economics of sugar have fundamentally changed?
In the conluding segment of the interview with Syed Firdaus Ashraf/ Rediff, Deepak Ballani, director general, Indian Sugar and Bio-energy Manufacturers Association (ISMA), discusses the rising cost of sugar production, the widening gap between cane prices and sugar MSP, the government’s stock limits, and what consumers can expect from sugar prices over the next three to six months.
Impact of Excessive Rainfall on Sugarcane Production
Last September-October, excessive rainfall affected sugarcane-growing regions in Maharashtra, Karnataka and Gujarat. How much damage did the industry actually record — in percentage terms — in each of these three states?
It is rightly stated that excessive rainfall in these states resulted in drop in sugarcane production in these three states. Domestic production for the current season has adjusted to approximately 309 lakh tonnes due to lower sugarcane yields and reduced recovery rates.
In Maharashtra, excessive rainfall, prolonged cloud cover, and erratic temperatures impaired vegetative growth and caused premature flowering, compounded by an 18% to 20% higher crushing pace.
This resulted in a drop in production by almost 10% to 12% against preliminary estimates of sugar production.
Outlook for Sugar Prices and Stabilisation
What is your outlook for the next three to six months? When can consumers realistically expect sugar prices to stabilise, and what price range do you expect at the retail level?
Against the backdrop of recent actions taken by the government, sugar prices have eased down since last 3-4 days and are expected to further cool down down in times to come.
With factories starting early for the next season, fresh sugar will enter market 10-15 days earlier than usual, and sugar price are expected to remain affordable in near term.
Rising Production Costs and Price Justification
How much has the cost of producing sugar increased for mills because of higher sugarcane prices, labour, transportation, power, and other input costs? Is the current sugar price justified by the industry’s cost structure?
Cost Structure Dynamics: Sugarcane accounts for 70% to 75% of the total cost of producing sugar.
Along with statutory annual increases in cane procurement prices, mills face ongoing inflation in seasonal harvesting and plant labour, freight/diesel logistics, and electricity/conversion overheads.
Cost vs Ex-Mill Realisation: Driven by higher raw material and operational overheads, the industry’s average ex-mill cost of production is over ₹43/ kg, whereas wholesale ex-mill market realisations often track near or below operational breakeven.
Price Justification & Solvency: Ex-mill sugar prices reflect genuine cost pressures rather than excess margins.
Mill balance sheets and timely farmer payments are sustained by a diversified revenue base — principally through the Ethanol Blended with Petrol (EBP) programme, power cogeneration, and by-products — which provides the necessary financial liquidity to operate without subsidies.
FRP vs Frozen MSP Disconnect
As the FRP of sugarcane has been increased every year while the sugar MSP has remained stable since 2019 at ₹31 per kg, how much pressure does the hike to ₹365 per quintal for the 2026-27 season put on production costs?
FRP vs Frozen MSP Disconnect: While the Minimum Selling Price (MSP) of sugar has remained unchanged at ₹31 per kg since February 2019, the Fair and Remunerative Price (FRP) of sugarcane has been revised upward consistently.
FRP Hike Metrics to ₹365/quintal: Long-Term Growth: The benchmark FRP has increased from ₹275 per quintal in 2018-19 to ₹365 per quintal for the 2026–27 season — a cumulative statutory cost rise of 32.73% against a 0% revision in the MSP floor price.
Year-on-Year Growth: The revision from ₹355 per quintal (2025–26) to ₹365 per quintal represents a 2.82% direct increase.
This will result in increase in cost of production to over Rs. 43 per kg for the next season.
Balancing Farmer, Mill, and Consumer Interests
Consumers are paying more for sugar while farmers also need remunerative prices for sugarcane. What is the right balance between protecting farmers, keeping mills financially viable, and ensuring affordable sugar for the common consumer?
Protecting sugarcane growers relies fundamentally on the underlying financial health and liquidity of sugar mills.
Statutory revisions to cane prices (FRP) achieve their true purpose only when processing mills generate adequate cash flows to settle dues without accumulating arrears.
With over 97% of cane dues for the 2025-2026 season already cleared, sustaining this record requires policy mechanisms that prevent revenue deficits at the mill level.
To maintain operational viability, the industry requires an alignment between regulatory floors and actual manufacturing economics.
While the Minimum Selling Price (MSP) of sugar has remained frozen at ₹31 per kg since 2019, production costs have escalated beyond ₹43 per kg.
A calibrated upward revision of the sugar MSP closer to actual production costs (₹43 per kg), combined with the continued growth of the Ethanol Blended with Petrol (EBP) programme — which absorbed approximately 30 lakh tonnes of surplus sugar in 2025-2026 — enables mills to remain self-sufficient and subsidy-free.
Effectiveness of Government Stock Limits
The government has introduced stock holding limits on sugar dealers and is monitoring sugar availability. Do you think this will work in reducing the sugar prices?
Immediate Market Softening: Owing to the corrective measures taken by the government, sugar prices have already begun to ease over the past few days.
The coordinated enforcement has successfully started unwinding artificial price spikes driven by speculative holding and advance buying ahead of the festive season.
Mechanism of Action: By imposing a 15-day rolling stock limit on bulk and institutional consumers (>10 MT/month) and capping dealer holdings (currently 400 MT), large commercial users are transitioned back to a ‘just-in-time’ procurement model.
This releases concentrated inventory from private godowns directly into wholesale and retail distribution pipelines without requiring additional physical production.
Near-Term Price Outlook: Prices are expected to soften further in the coming days as these regulatory measures take full effect.
Operating in tandem with calibrated monthly release quotas, ongoing special crushing in Tamil Nadu and Karnataka, an early 10-15-day advancement of the 2026-27 main crushing season (10 LMT output in October), and the precautionary 10 LMT duty-free import window, domestic availability will remain ample at stable, affordable prices throughout the festive season.
