The government of India announced a hike in MSP (Minimum Support Price) of Rs 25 per quintal on the price of sugarcane yield for the period October 1, 2024 to September 30, 2025, which Anurag Thakur, Union Minister of Information & Broadcasting, said will “ensure fair and reasonable price of sugarcane to the farmers by the sugar mills. It has been decided to fix the price at Rs 340 per quintal for the year 2024-25 as compared to the previous year which was Rs 315 per quintal.”
Interestingly, the government says this is the highest price for sugarcane globally. This move is expected to benefit over 5 crore farmers in the country. The sugarcane crop is primarily harvested in Maharashtra, Uttar Pradesh and Karnataka. What’s more in the last couple of years, the MSP has been raised 3-4 times.
This on the other hand has not had much impact on the retail prices of ethanol-blended petrol, which many people would have liked to believe. It is to be noted that around 25 percent of ethanol is produced from sugarcane juice and sugar syrup, while around 45 percent comes from B-heavy molasses – a sugar processing byproduct with substantial sugar content. About 25 percent of ethanol is produced from the grain based sources.
Sachin Raole, CFO & Director Resources, Praj Industries told Financial Express Online, “The government has announced an increase in MSP for the yield of Sugarcane from Rs 315 to Rs 340, how much of this actually translates to increase in sugar cane prices will be completely dependent on the yield. The hike in MSP has been a trend that we have observed for the last 3-4 years, which has been positive for the key stakeholders – farmers, sugarcane mills, and ethanol players. But when one looks at the increase in prices of petrol, we don’t see much impact from the increase in ethanol prices, in fact, if one looks at the increase in retail petrol prices in the country, it has been mainly due to the global crude prices, and not ethanol. Going ahead, everything will be dependent on the overall sugarcane yield and the prices. Overall, we see this as a positive for the ethanol industry.”
Sanket Thakkar, Vice-President – Sector Head – Corporate Ratings, ICRA said, “The current sugar prices in Maharashtra, Karnataka and Uttar Pradesh have somewhat stabilised. We had seen a peak in sugar prices, touching Rs 40 per kg in Uttar Pradesh and up to Rs 41 per kg in certain parts. The announcement of the hike in sugarcane prices on the yield is a positive for the farmers. There might be some impact on the margins of the industry players in FY2025-2026. There is also the possibility of a revision in the ethanol-blending cap going upwards from the current 17 lakh tonnes by the government depending on the production estimates and closing stock as we approach SY2025. The real impact (if any) will be known post-November 2024 when OMCs usually renew their procurement prices with ethanol producers and also how the domestic sugar prices pan out during that period.”
