Industry Body Warns Of Sugar Sector Collapse, Urges Govt Action

For the 2024-25 season (October-September), NFCSF projects opening stocks at 80 lakh tonnes, with production expected to reach 325 lakh tonnes, excluding ethanol diversion

The National Federation of Co-operative Sugar Factories (NFCSF) has issued a stark warning about a potential crisis in the sugar industry, urging the government to take immediate action to prevent its collapse. In a letter to the Union Food Secretary, the federation highlighted the severe financial strain facing the sector, caused by a combination of high sugar stocks and rising production costs.

For the 2024-25 season (October-September), NFCSF projects opening stocks at 80 lakh tonnes, with production expected to reach 325 lakh tonnes, excluding ethanol diversion. With domestic consumption estimated at 290 lakh tonnes, this would leave approximately 115 lakh tonnes of sugar stored in the warehouses of 535 factories across the country.

The federation also pointed out the growing financial pressures on the industry. Although the government has raised the Fair and Remunerative Price (FRP) for sugarcane by 8 per cent to Rs 3,400 per tonne for 2024-25, the industry's Minimum Selling Price (MSP) has remained unchanged at Rs 31 per kg since 2018-19, even as production costs have surged to Rs 41.66 per kg.

NFCSF stressed that the sugar industry must spend an estimated Rs 1.5 lakh crore to sustain operations, with 75 per cent of this amount required for farmer payments and the remainder for factory operations.

The federation also raised concerns over ethanol pricing and allocation. The sector’s contribution to the Ethanol Blending Programme has declined sharply, from 83 per cent in 2021-22 to just 37 per cent now, following restrictions imposed by the government in December 2023. For the Ethanol Supply Year 2024-25, oil marketing companies have allocated 837 crore litres of ethanol, with the sugar industry expected to provide 317 crore litres, requiring the diversion of approximately 40 lakh tonnes of sugar.

Despite the increase in the FRP, ethanol prices from B-heavy molasses and sugarcane juice have not been adjusted in over a year, further undermining the sector’s economic viability.

To restore the industry's financial health, NFCSF has called for a revision of ethanol prices to Rs 73.14 per litre for sugarcane juice-based ethanol and Rs 67.70 per litre for B-heavy molasses-based ethanol.

The federation has urged the government to take swift and decisive action to address these critical challenges and secure the long-term stability of the sugar industry.