For a Robust Sugar Sector, Decision-Making Needs to Keep Pace with Evolving Situations

As the Israel-US aggression on Iran continues into the second month, India’s agriculture and food sector has largely remained shielded from the impact of war. The Oil Marketing Companies, in theory independent of administered prices, have not increased petrol and diesel prices even though WTI and Brent crude futures have risen by 67% and 50%, respectively. It is possible that the hike will come after the assembly elections in West Bengal, Tamil Nadu and Kerala.

To maintain the resilience of India’s agricultural sector, policies should keep pace with domestic and global developments. By March 31, 2026, sugar production reached 272.31 lakh tons, up 9% from last year. Despite this, the sector faces two major challenges: the price of sugarcane ethanol and the low Minimum Sale Price of Sugar. 

Of all the crops grown in India, sugarcane is subject to the most stringent regulation by the government. Almost every stage of the crop cycle, from production of sugarcane to production of sugar and its by-products, is under some form of regulation. As a result, the sugar sector looks to the government almost every year as it faces unforeseen challenges. For the farmers, it is the most remunerative crop despite its longer duration.

As per the latest report of Commission for Agriculture Cost and Prices (CACP), the return on sugarcane cultivation is higher than that of other crop combinations. At the all-India level, the relative return from sugarcane was around 1.7 times that of paddy+wheat and cotton+wheat combination. It was two times that of soybean+wheat, 2.4 times of paddy+paddy, and around three times of soybean+gram combination. It is less susceptible to damage from stray cattle and requires less labour during cultivation. The farmers are guaranteed to receive the price declared by the Union government. In several states, they get an even higher price. For no other crop, the private processors are mandated by law to provide a price fixed by the government. 

It is therefore no surprise that area under sugarcane has risen from 3.65 million hectare (ha) in 2004-05 to 5.07 million ha in 2014-15 and 5.45 million ha in 2024-25. Sugarcane production was 235 million tonnes in 2004-05. It increased to 450.12 million tonnes in 2024-25. Uttar Pradesh, Maharashtra and Karnataka are the largest producers. Sugarcane production is closely associated with politics in both UP and Maharashtra.

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Over the years, the sugar industry has faced substantial fluctuation in fortunes. Due to high production, sugar mill gate prices crashed, leading to defaults on the payment of cane dues to farmers. By May 2018, the cane dues reached a record high of  Rs 23,232 crore.

At the demand of the sugar industry itself, the Union government, on June 7, 2018, notified a Minimum Sale Price (MSP) of Rs 2,900 per quintal of sugar under the Sugar Price (Control) Order, 2018. It was revised to Rs 3,100 per quintal on February 4, 2019. The price has not been revised in the last seven years. In that sugar season (October 2018-September 2019), the Fair and Remunerative Price (FRP) of sugarcane was fixed by the Union government at Rs 275 per quintal. By 2025-26, it has gone up to Rs 355 per quintal. In several states, the State Advised Price (SAP), announced by the state governments, is higher than FRP. For example, in UP, the mills are required to pay Rs 400 per quintal. In Punjab the SAP is even higher at Rs 416 per quintal.

The profitability of sugar mills is critical to the health of the sugarcane economy, which supports the livelihoods of about 50 million farmers and workers. It has brought relative prosperity to regions growing sugarcane. So, there is a strong case for upward revision of the minimum sale price of sugar. 

At the current FRP, the cost of producing sugar is around Rs. 4,160 per quintal. The MSP of sugar at Rs 3,100 per quintal does not even remotely reflect the sector’s cost realities. 

In Maharashtra, farmers are still waiting for payment of cane dues, which have mounted to Rs 4,898 crore by March 31, 2026. This is not good news for the sector.

There is a strong case for increasing the MSP of sugar to Rs 4,000 per quintal to ensure that sugar mills remain profitable and farmers do not have to wait endlessly for cane supplied to sugar mills.

Despite the global crisis due to aggression on Iran, decisions on agriculture and food sector should not come to a standstill.

Siraj Hussain is a former Union agriculture secretary.

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