February 28, 2025 – Lucknow, Uttar Pradesh: The Indian Sugar and Bio Energy Manufacturers Association (ISMA) has urged the Uttar Pradesh government to take immediate steps to rationalise sugarcane pricing, highlighting the growing concerns of the sugar industry and farmers alike. With the state being India’s largest sugarcane producer, the call for a balanced pricing mechanism comes at a critical time as the 2024-25 crushing season progresses.
The plea from ISMA stems from the need to address the widening gap between the State Advisory Price (SAP) and the rising costs faced by sugar mills and farmers. The SAP, which determines the price at which mills purchase sugarcane from growers, has remained stagnant despite the recent hike in the Fair and Remunerative Price (FRP) set by the central government. The FRP, effective from October 1, 2024, reflects an increase aimed at ensuring fair returns for farmers. However, the unchanged SAP in Uttar Pradesh has sparked debates about its sustainability for both growers and the industry.
Industry stakeholders argue that rationalising cane pricing is essential to maintain the viability of sugar mills, many of which are struggling to clear dues owed to farmers. The introduction of the Minimum Selling Price (MSP) for sugar in 2018 has significantly reduced cane arrears, with nearly 99% of Rs 1.14 lakh crore paid to farmers in recent years. Yet, the lack of adjustment in SAP amid rising operational costs and fluctuating global sugar prices has put additional pressure on mills. ISMA has emphasized that without a revised pricing structure, the sector’s ability to support farmers and contribute to the economy could be at risk.
Uttar Pradesh boasts a sugarcane cultivation area of 6 million hectares, a figure that has grown by 18% over the past decade. Production has also surged by 40%, reaching 491 million tonnes, thanks to favorable monsoon conditions and increased acreage. For the 2024-25 season, ISMA projects a gross sugar output of 33.3 million tonnes, though this estimate has been slightly tempered by temporary disruptions in cane supply due to late-December rains. Despite these challenges, the state’s sugarcane sector remains a powerhouse, making the pricing issue even more pressing.
The association has also pointed to the ethanol production landscape as a factor in the pricing debate. With the central government lifting an eight-month ban on ethanol production from sugarcane juice and B-Heavy molasses in August 2024, mills are diverting an estimated 4 to 4.5 million tonnes of sugar toward ethanol this season. Current ethanol rates stand at Rs 65.61 per litre for cane juice, Rs 60.73 for B-Heavy molasses, and Rs 56.28 for C-Heavy molasses. ISMA has called for an increase in these rates, arguing that the 11.5% rise in FRP should be reflected in ethanol pricing to ensure mills can sustain operations and pay farmers promptly.
The economic and political stakes are high in Uttar Pradesh, where around 45 lakh sugarcane growers form a significant voting bloc. Speculation is rife that the state government may hesitate to revise the SAP this year to avoid burdening mills, some of which have historically delayed payments to farmers. However, political allies of the ruling party have demanded a SAP of Rs 400 per quintal, adding pressure on the government to act. A high-level meeting is expected soon to deliberate on this issue, with all eyes on the outcome.
ISMA has also highlighted the export potential as a reason for urgency. With domestic consumption projected at 28 million tonnes for 2024-25—down from previous years due to the absence of major events like the 2024 General Elections—the industry sees an opportunity to export up to 2 million tonnes. Global sugar prices have recently firmed due to reports of a potential drop in Brazil’s crop, offering India a chance to reclaim market share. However, without a rationalised pricing framework, mills may lack the financial stability to capitalize on this window.
As the Uttar Pradesh government weighs its options, the call to rationalise cane pricing underscores the delicate balance between supporting farmers, sustaining the sugar industry, and meeting national goals like ethanol blending. The decision will not only shape the state’s agrarian economy but also set a precedent for sugarcane pricing across India. For now, stakeholders await a resolution that ensures fairness and growth for all involved.
