The Indian sugar industry is of particular importance for the country’s economy – it is not merely a producer of a necessary food item but rather an intricate ecosystem combined with the livelihoods of countless farmers, workers, and other supporting industries.
The government has marked the sector as one of the pillars of economic growth. It is believed to have enormous potential to aid India’s energy dominance goal through ethanol production. This changing role of the sugar provider into a bioenergy powerhouse accentuates this Indian sugar industry’s value positioning further.
Unfortunately, the sugar industry is suffering from a myriad of issues that pose a threat to its long-term viability. These challenges must be dealt with strategically as they can arise from agricultural drawbacks, political inconsistencies, and many other avenues.
The weak points of the industry in question allow even minute changes in political policies, climate, or pest and disease concentration to have steep negative effects. These challenges are all interconnected and form the following broad categories:
Low sugarcane productivity
A core issue is the low productivity of sugarcane. Traditional farming methods, coupled with limited mechanisation due to fragmented landholdings, hamper yields. Sugarcane, a water-intensive crop, is highly dependent on the monsoon, and erratic rainfall patterns can severely impact harvests.
Climate change, manifesting in unpredictable rains, further exacerbates these problems, leading to diminished cane quality and increased vulnerability to pests and diseases. The decline of the once-prominent Co-0238 sugarcane variety has significantly impacted sugar production in northern India, and the pipeline of promising replacement varieties is insufficient to incentivize widespread adoption.
Cane Control Act and khandsari/crushers
The Cane Control Act’s exemption for “Khandsari & crushers” creates an uneven playing field. These producers often procure cane at depressed prices early in the season, exploiting farmers and subsequently offering inflated prices later, disrupting the crushing schedules of established sugar mills.
It is estimated that over 30 per cent of India’s sugarcane crop is diverted to khandsari and gur production using less efficient machinery and technology, depriving the more efficient sugar industry of this essential raw material.
Inefficient operation
The sugar industry’s seasonal nature, with crushing periods typically lasting only four to seven months annually, presents a significant challenge. This short operating window makes it difficult to justify substantial capital investment in machinery and technology upgrades, given the extended payback periods.
The limited season also creates a disincentive for trialing new technologies and conducting R&D at a commercial scale due to the heightened risk of failure. Although the financial climate has improved, industry’s seasonal nature continues to pose challenges, reminiscent of times when banks categorized the sugar industry as high-risk, hindering investment.
Restriction on the export of sugar
Prior to the 2024-25 season, sugar stocks reached approximately 9 million metric tons, the highest level in recent years. This surplus depressed sugar prices, impacting profitability and making it difficult to recoup increased sugarcane costs. The recent government authorisation of ten lakh tonnes of sugar exports offers a measure of relief, with prices showing signs of strengthening.
Ethanol blending programme
Last season, government restrictions on diverting sugarcane juice/syrup for ethanol production, coupled with limited allowances for using B-heavy molasses, dealt a blow to the sugar industry, creating apprehension about future policy directions. While the situation has improved this season, but much awaited government decision for increase in ethanol prices, disappointed the industry as prices of ethanol produced from BH Molasses and sugar cane juice or syrup remained unchanged and price of ethanol produced from C molasses only, increased. Most of the industry is producing ethanol from BH molasses or Sugar cane Juice or Syrup will face margin pressure especially due to increase in sugar cane price last year.
Revision of sugar MSP
The Minimum Support Price (MSP) for sugar has not kept pace with rising sugarcane prices and requires revision. While current market prices are above the MSP, a low MSP can negatively impact the industry during periods of surplus production and discourage long-term investment in expansion or new projects.
Higher cost of production
Owing to processes like labor-intensive harvesting, poor infrastructure, and high energy expenses, there is a high production cost in the sugar industry. Because of this, Indian sugar cannot compete in the global market. Other factors, such as shorter crushing seasons, increase fixed costs, which results in the inability of mills to spend money on improving or developing infrastructure.
Due to the complexity of the issue, finding a solution dynamic in nature is necessary. Boosting productivity requires improving irrigation infrastructure, encouraging the use of high-yielding sugarcane varieties, and mechanizing harvesting practices. Climate-resilient varieties can be optimised by investing in research and development. For cane processors to compete, there need to be policies that ensure a stable and predictable environment for the sugar industry.
To summarise: Competitiveness can be improved by streamlining regulations, encouraging the use of pricing mechanisms based on market demand, and investing in technological upgrades. In addition to this, water and energy-efficient methods should be used to promote sustainable practices, which enable the sugar industry to thrive in the long run. To unlock the potential of the sugar sector, a collaborative effort between farmers, policymakers and industry stakeholders is required.
The author is Executive Director, Gobind Sugar Mills,
