India’s sugar mills caught in a five-way squeeze and farmers may pay the price: Praful Vithalani – News Air Insight

India’s sugar industry has spent the last decade transforming itself from a cyclical commodity business into a diversified, ethanol-linked sector — a shift actively encouraged by government policy. Now, a combination of policy reversals, frozen price support, and a geopolitical energy shock is threatening to undo that progress, with cooperative mills in Maharashtra bearing the heaviest burden.

Farmers may change their field from sugarcane to some other cash crop — and that can make a problem in the future. India was always an exporter, and that should be continued,” says Praful Vithalani, Founder Chairman, AISTA, talking to ET Now.

The structural concern runs deeper than a single bad season. Vithalani warns that if farmer dues continue to rise unpaid, the crop-switching risk becomes very real — a dynamic that could structurally erode India’s status as a reliable sugar exporter. The industry, he notes, shed its cyclical character after 2014 through ethanol diversification; the current policy environment risks reintroducing that very cyclicality.

The five-way squeeze

• Regional price disadvantage: Maharashtra and Karnataka mills consistently receive 5–8% lower sugar price realisations than their north and south Indian counterparts due to geography.
• Frozen MSP: The minimum selling price for sugar has not been revised in seven years, eroding mill economics as input costs — especially the FRP paid to farmers — have risen steadily.
• Ethanol allocation slashed: The petroleum ministry has cut the sugar industry’s ethanol supply allocation to 26%, blindsiding mills that collectively invested ₹40,000 crore in ethanol infrastructure nationally.
• Cooperative mills locked out of capital markets: Over 50% of Maharashtra’s mills are cooperatives with no access to equity markets or foreign financing — leaving them uniquely unable to absorb these shocks.
• El Niño risk: If an El Niño weather event materialises, it could compound every existing pressure, threatening cane yields and accelerating the drift of farmers away from sugarcane cultivation.

Domestic demand and export outlook

The ongoing industrial gas disruption has created a short-term dent in domestic consumption — Vithalani estimates two to three lakh tonnes of potential demand loss — but he does not view this as a structural concern. The bigger variable remains the duration of the geopolitical situation, rather than any fundamental weakening of sugar consumption.

On exports, the picture is more nuanced. The government has already cleared a 15 lakh tonne export quota, but only around two lakh tonnes have actually been shipped. The remaining headroom is significant, and with global sugar prices elevated, regional buyers including Sri Lanka and Gulf nations are increasingly looking to India for white sugar supplies. The constraint is not policy — it is the end of the crushing season, which limits the ability to produce additional raw sugar for international markets at this stage.

The opportunity for India’s sugar exporters is real, particularly given surging global prices and demand from Asian and Gulf buyers. But capitalising on it requires mills to first stabilise their finances — which, for cooperative mills in Maharashtra, remains the more pressing and immediate challenge.