ISMA seeks higher ethanol quota, warns on sugarcane farmer payments

New Delhi, Oct 29 (PTI) Sugar industry has demanded a bigger share of ethanol supply contracts for the 2025-26 season, warning that inadequate allocation could trigger financial stress and delay payments to cane farmers, an industry body said on Wednesday.

The Indian Sugar & Bio-Energy Manufacturers Association (ISMA) said sugar mills have been allocated just 289 crore litres of ethanol -- 28 per cent of the total requirement of 1,050 crore litres, while grain-based distilleries received 760 crore litres, or 72 per cent.

The allocation falls short despite the sugar sector investing more than Rs 40,000 crore to build ethanol capacity exceeding 900 crore litres, ISMA said.

"There has been some kind of a policy gap and planning gap as far as the OMCs (oil marketing companies) are concerned, which has led to the abnormality and disruption in allotment of ethanol for the sugar industry," ISMA Director General Deepak Ballani told reporters.

The ethanol blending programme was launched to help the sugar industry escape cyclical oversupply and prevent arrears to cane growers, but the policy shift toward grain-based ethanol, particularly from maize, has disrupted that plan, Balani said.

ISMA is seeking at least 50 per cent allocation for sugar-based feedstocks and expects about 150 crore litres in a supplementary tender for 2025-26 season (November-October).

The industry also called for an increase in the minimum selling price (MSP) for sugar, which has been unchanged at Rs 31 per kg since February 2019, even as the government-set fair and remunerative price (FRP) for cane has risen 29 per cent to Rs 355 per quintal.

Uttar Pradesh, India's top sugarcane-growing state, has raised its state advisory price (SAP) by Rs 30 per quintal for the 2025-26 marketing year (October-September), further squeezing mill margins.

The cost of sugar production has risen to Rs 40.24 per kg, ISMA Vice President Niraj Shirgaokar said, warning that falling market prices could drop below production costs by December.

"Unless sugar mills are able to get the proper revenue realisation, it will be very difficult to make the cane payments to the farmers," Shirgaokar said.

ISMA estimates surplus production against domestic consumption of 28.5 million tonnes, with only 3.4 million tonnes of sugar diverted to ethanol, creating a potential glut that could depress prices further.

The industry body has requested permission to export 2 million tonnes in the 2025-26 marketing year (October-September), citing a window for low-quality white sugar from December to March before Brazilian supplies arrive in April.

"We are hoping for a window for three to four months... if an early announcement of export of 2 million is done," Shirgaokar said.

Lower ethanol allocation could lead to distillery utilisation below 50 per cent, reduced sugar diversion and excess stocks, potentially causing cash flow constraints and delayed farmer payments, ISMA warned.

India has about 2,000 crore litres of ethanol capacity, sufficient for 30 per cent blending, but the current policy imbalance threatens to undermine investments made to achieve the government's biofuel targets, the association said. PTI LUX TRB