February 28, 2025 – The Indian Sugar and Bioenergy Manufacturers Association (ISMA) has renewed its call for a sugar export subsidy to address mounting inventory levels, signaling a pressing need for government intervention in the sugar industry. With domestic production remaining robust and stocks piling up, the industry body argues that allowing exports with financial support could ease the burden on sugar mills while ensuring timely payments to sugarcane farmers.
India’s sugar sector is grappling with a surplus that has been building over recent seasons. According to ISMA’s latest estimates, the 2024-25 sugar season (October-September) is projected to yield approximately 33.3 million tonnes of sugar, slightly lower than the previous year due to weather-related challenges like drought in Maharashtra. However, with domestic consumption hovering around 28 to 29 million tonnes annually, a significant excess remains. This surplus, combined with a closing stock expected to exceed 9 million tonnes by September 2025, has raised concerns about storage costs and liquidity constraints for millers.
The proposal for an export subsidy comes as a strategic move to offload excess sugar onto the global market. ISMA has suggested that the government permit the export of at least 2 million tonnes of sugar, supported by a subsidy to make Indian sugar competitive internationally. Global sugar prices have fluctuated in recent months, influenced by factors like reduced output in Brazil and the El Niño phenomenon. An export subsidy could help Indian mills capitalize on these dynamics, turning a domestic challenge into an economic opportunity.
Historically, India has toggled between export restrictions and incentives depending on production levels and domestic needs. Two years of export bans, coupled with cuts in sugar diversion for ethanol production last season, have exacerbated the current inventory glut. ISMA contends that without relief, mills face rising carrying costs for idle stocks, which could jeopardize their ability to clear dues owed to farmers. The fair and remunerative price (FRP) of sugarcane has increased steadily, pushing production costs higher, while the minimum selling price (MSP) of sugar—fixed at Rs 31 per kilogram since 2019—has not kept pace. This mismatch has squeezed millers’ margins, prompting ISMA to also demand an MSP hike to Rs 39.14 per kilogram.
The ethanol blending program, a key government initiative to reduce fossil fuel dependency, has been a partial outlet for excess sugar. ISMA estimates that around 4.2 million tonnes of sugar will be diverted for ethanol this season, supporting the 20% blending target. Yet, even with this diversion, the surplus persists. An export subsidy, ISMA argues, would complement ethanol efforts by providing an additional channel to manage inventory, ensuring mills remain financially viable.
The proposal has sparked debate within policy circles. Critics caution that subsidies could draw scrutiny at the World Trade Organization (WTO), where India has faced past disputes over sugar support measures. Brazil, a major sugar exporter, challenged India’s subsidies in 2019, leading to a WTO ruling that deemed certain assistance inconsistent with global trade rules. Proponents, however, assert that a temporary subsidy tied to inventory management would differ from broad production-linked support, potentially sidestepping international backlash.
Beyond economics, the move carries implications for rural livelihoods. Sugarcane farmers, numbering in the millions across states like Uttar Pradesh, Maharashtra, and Karnataka, rely on prompt payments from mills. Excess stocks and low sugar prices—currently averaging Rs 35-35.5 per kilogram, down from Rs 38 last year—threaten this ecosystem. ISMA’s push for exports aims to stabilize the sector, ensuring farmers are not left bearing the brunt of market imbalances.
As the government mulls its options, ISMA remains optimistic. Favorable monsoon rains this year have bolstered sugarcane acreage, setting the stage for a strong 2025-26 season. This potential for sustained high production only heightens the urgency of addressing current stocks. A decision on the subsidy and export permissions is anticipated by mid-2025, with industry stakeholders closely watching for signals from New Delhi.
For now, the sugar industry stands at a crossroads. An export subsidy could unlock liquidity, relieve inventory pressure, and reinforce India’s position in the global sugar trade. Whether policymakers agree remains to be seen, but ISMA’s plea underscores a critical juncture for one of India’s most vital agricultural sectors.
