Maharashtra sugar industry seeks policy revisions, financial support to overcome economic challenges

Maharashtra has secured the top position in sugar production at the national level, achieving a remarkable 110 lakh tonnes during the 2023-24 sugar season, which concluded in April 2024. Additionally, the State produced and supplied 580 million litres of ethanol by June 30, 2024.

However, despite these impressive production figures, the sugar industry in Maharashtra is grappling with significant financial challenges and industry players have demanded policy revisions and financial support to navigate the current economic challenges and ensure sustainable operations in the forthcoming season. 

The Minimum Selling Price (MSP) for sugar was set at ₹31 a kg in the 2018-19 season, effective from February 14, 2019. Since then, the cost of raw material, particularly sugarcane, has seen substantial annual increases. For the upcoming 2024-25 season, the Fair and Remunerative Price (FRP) for sugarcane has been raised to ₹3,400 a tonne. Meanwhile, the average cost of sugar production across India stands at ₹41.66 per kg based on State-wise production costs.

“This data has been submitted to the Government of India, highlighting the urgent need to revise the MSP of sugar. Without this revision, sugar mills are incurring cash losses on every kilogram of sugar sold, as market prices remain lower than the production costs,” said BB Thombare, President West Indian Sugar Mills Association (WISMA).    

Ethanol Production

He added that ethanol production, a critical revenue stream for sugar mills, has also been severely impacted. Recent government notifications imposed restrictions on sourcing ethanol from sugarcane juice and B-heavy molasses routes. These restrictions have drastically reduced the operational days of distilleries from a typical 270-330 days to just 180 days. This reduction has caused significant financial strain on sugar mills, as liquidity is blocked in unutilised stocks, leading to defaults in loan repayments for the loans taken to set up or expand ethanol plants. There is an urgent need for an upward revision of ethanol prices, aligning them with the increased FRP of sugarcane.

To meet the ethanol blending programme for the forthcoming 2024-25 season, it is crucial that an ethanol policy be announced by August 15, 2024. This will allow sugar mills to prepare for the required ethanol production and supply on time, said Thombre and M Prabhakar Rao, President Indian Sugar and Bio energy Manufacturers Association, in the statement.

Loan Rejig

Industry players say that combined financial impact of government-imposed ethanol production restrictions, lower offtake of monthly sugar quotas, and the annual increase in FRP has forced sugar mills to take out loans each season.

“Consequently, there is a pressing need for the restructuring of these loans. This restructuring should include a two-year moratorium and a ten-year repayment period for all short-, medium-, and long-term loans from the Sugar Development Fund (SDF), National Cooperative Development Corporation (NCDC), co-operative banks, and nationalised banks. This would enable sugar mills to manage their finances better and honor their repayment obligations,” said Thombre and Rao.