Higher sugar MSP: A critical reform needed to ensure timely payment to farmers

In my many interactions with the sugar millers, I have found a common point of concern amongst them: the stagnant Minimum Selling Price (MSP) of sugar and how, despite successive hikes in sugarcane FRP and SAP, MSP has remained frozen. This widening gap between costs and revenue has become a structural challenge for the industry.

The sugar MSP was brought in by the Government in 2018 with two primary objectives- protecting the interests of the farmers and ensuring that sugar mills are covered against losses on account of the high cost of sugar production. Faced by surplus sugar production and higher accrual of sugarcane price arrears, sugar mills were resorting to distress selling of sugar much below the remunerative price. The Government intervened and set the sugar MSP at Rs 29 a kilo, which was hiked to Rs. 31 per kilo, within a year.

One of the important components of the cost of sugar production in India, borne by the sugar mills, is on account of sugarcane payment, which has seen a steady increase over the years. Since 2019, the cane FRP has increased from Rs. 275 per quintal to Rs. 355 per quintal (2025–26), a 29% increase, which is staggering for the industry.

This has worried the sugar mills, and they fear delayed cane price payment to farmers.

In a recent interview with ChiniMandi, the Director General of the Indian Sugar & BioEnergy Manufacturers Association (ISMA) said that the average ex-mill price for Maharashtra and Karnataka is hovering much below the cost of production of sugar at around Rs. 37.5 per kg, while the pan-India average cost of production is around Rs. 39 per kg.

“This clearly shows the gap between the ex-mill price and the cost of production of sugar, directly impacting the profitability of the sugar mills, which will have an impact on the sugarcane payments to the farmers,” he said.

Also the recent surge in sugarcane costs in Uttar Pradesh, Karnataka, Punjab, Haryana, and Uttarakhand has pushed the pan-India average cost of sugar production to Rs. 41.72 per kilogram, as per ISMA.

Ballani further added that the Association believes that the MSP of sugar should be adequate enough to at least cover the cost of production of sugar.

Another apex industry association, the National Federation of Cooperative Sugar Factories (NFCSF) echoed the same sentiment, saying that a revised sugar MSP will provide statutory price stability, improve liquidity, ensure timely cane price payments, and enable cooperative and rural banks to undertake fair valuation of sugar stocks for working capital assessment of cooperative sugar mills.

A higher Sugar MSP linked with the prevailing market conditions will increase access to pledge-based financing, which is critical for uninterrupted mill operations throughout the season.

The industry said that if the Government does not revise these prices, the sustainability of the sugar industry will be seriously threatened and ultimately, the cost will fall on farmers, leading to defaults in payments and financial stress for sugar mills.

It is important to note here that the sugar indystry in the last five years has been able to ensure timely farmer payments. However, without supportive pricing, both the industry and nearly 5 crore farmers dependent on it will suffer.

The sugar industry is the second-largest agro-based industry in the country, which directly impacts the livelihoods of 5 million farmers and their families. Today, the industry is playing a crucial role in the green energy self-reliance of the country.

A stagnant MSP is like putting a spoke in the growth momentum of this critical industry, and it is high time that the Government should understand that the sugar MSP is not merely a pricing issue, but a structural reform needed for the growth of the sugar industry, maintaining the livelihoods of the farmers and propelling India’s biofuel economy.