Widening gap between cost of production and administered sale prices of sugar has led to sharp rise in cane payment arrears to ₹ 16,087 crore till mid February, 15% higher on year, a senior industry official said on Thursday.
“The industry is increasingly concerned about the widening gap between rising production costs—now estimated at around ₹ 41.6/kg and the current ex-mill realizations, which continue to hover at a pan-India average of ₹ 38–39/kg. This mismatch is exerting significant pressure on mill cash flows, weakening operational viability and contributing to a sharp rise in cane payment arrears,” Deepak Ballani, director general, Indian Sugar and Bio-Energy Manufacturers Association (ISMA) told FE.
Ballani said that the cane arrears is expected to grow further as delayed payments have a direct and adverse impact on farmers’ incomes, as sugarcane cultivation is input-intensive and dependent on timely cash flows for reinvestment, loan repayment, and household needs.
MSP-FRP Mismatch
The industry has urged the food ministry to revise upward the minimum selling price (MSP), aligned with prevailing cost structures, is critical to restore mill viability, ensure timely payments to farmers.
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The MSP of sugar remained unchanged at Rs 31/kg since February 2019, while fair and remunerative prices (FRP) has increased by 29% to Rs 355/quintal, which had boosted cost of production to over Rs 41/kg at present.
In December last year the food ministry official had stated that it would take a call on revision of MSP by January this year which would assist the sugar industry and ensure the timely cane payment to farmer
Sugar production up 9% at 27.23 MT till March end
Production Surges 9%
According to ISMA, sugar production has increased by around 9% to 27.23 million tonne (MT) in the sugar season 2025-26 (October-September) till March 31, compared to 24. 87 MT during the same period last year.
The trade body stated that while sugar production has increased, the number of operational mills has declined, with 56 factories out of 539 units currently in operations compared to 95 mills at the same time last year.
Uttar Pradesh has recorded production of 8.75 MT, which is at the same level as last year. However, only 28 mills are currently operational in the state out of the total 121, compared to 48 mills during the corresponding period last year.
Maharashtra and Karnataka have reported a rise in sweetener output this season. Maharashtra has produced 9.93 MT, up from 8.02 MT last year, while Karnataka’s production stands at 4.79 MT compared to 3.99 MT in the same period last season. At present, around 4 factories are operational across both states, against 7 mills last year.
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In February, 2026, the industry association had revised downward its earlier projection of the sweetener’s production in the 2025-26 season to 32.4 MT from 34.35 MT citing lower productivity in Uttar Pradesh, Maharashtra and Karnataka.
Out of total output while 3.4 MT would be diverted for ethanol manufacturing and 1.5 MT is approved for exports in the current season
With annual consumption of sweetener in 2025-26 season is projected at 28.5 MT and opening balance as on October 1 was 5 MT, opening balance at the end of season is estimated at 6 MT, more than two months of consumption, ISMA stated earlier.
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