CANE CONUNDRUM

Rising Production Costs And Falling Prices Threaten ₹2,000 Crore Sugarcane Arrears As Mills Seek Policy Intervention

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A familiar cycle is repeating in the sugar sector.

The industry is facing excess supply, raising fears of a fall in sugar prices. As seen in the past, lower prices could make sugar production unviable for mills and lead to a buildup of cane arrears owed to farmers.

Current ex-mill sugar prices are hovering around ₹36-₹37 per kilogram, way below their cost of production. There is already news of a 5% fall in sugar prices in key sugar markets in India since the beginning of the marketing year in October. There are also reports of cane arrears already reaching around the ₹2,000 crore level in the state of Maharashtra itself.

Latest data suggest that the expected sugar surplus by the end of the ongoing 2025-26 season (October to September) is comfortably above the normal reserve stock required for domestic consumption.

As of 15th Dec '25, all-India sugar production has reached 7.82 million tonnes (after diversion for ethanol), registering healthy growth of about 28% over the 6.13 million tonnes produced during the same period last year.

For the whole season, industry lobby Indian Sugar & Bio-Energy Manufacturers Association (ISMA) has projected gross sugar production of 34.35 million tonnes (before diversion to ethanol), up by around 16% from around 30 million tonnes production in SS25.

With an opening balance of 5 million tonnes (from the previous season), estimated domestic consumption of 28.5 million tonnes, and diversion towards ethanol of around 3.4 million tonnes, the closing balance for the 2025-26 season is estimated at around 6 million tonnes after factoring in exports of 1.5 million tonnes.