Why Maharashtra’s sugar sector is under stress despite higher output
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Context
Despite higher sugar output, Maharashtra's sugar industry is facing a severe financial crisis. This is primarily due to a shortened cane crushing season, a pricing mismatch between rising sugarcane costs and stagnant sugar prices, and restrictive ethanol production policies. The crisis impacts lakhs of farmers and workers, threatening the stability of the state's rural economy.
UPSC Perspectives
Economic
The core of the sugar sector's distress lies in its regulated pricing mechanism. The Central Government fixes the Fair and Remunerative Price (FRP), the mandatory minimum price mills must pay farmers for sugarcane. For the 2025-26 season, the FRP has been increased to ₹355 per quintal. However, the Minimum Selling Price (MSP) for sugar, the floor price at which mills can sell their produce, has been stagnant at ₹31 per kg since 2019. This creates a severe liquidity crunch for mills as their input costs (sugarcane) rise while their output revenue is capped. The industry's demand to raise the sugar MSP to ₹41/kg reflects this squeeze. This situation highlights the partial implementation of sector reforms recommended by the [C. Rangarajan Committee], which had advocated for linking sugarcane prices to sugar and by-product revenues to de-risk the industry.
Governance & Policy
The government's policy on ethanol presents a paradox. The [Ethanol Blending Programme (EBP)] was designed to reduce oil imports, cut emissions, and provide a stable revenue stream for sugar mills by diverting excess sucrose. The national target is to achieve 20% ethanol blending in petrol by 2025. However, the article points to quota restrictions on sugar-based ethanol, limiting mills' ability to utilize their installed production capacity, which currently stands at only 27% utilization. This undercuts the EBP's objectives and prevents mills from fully benefiting from the diversification into bio-energy. The policy conflict between ensuring food (sugar) availability and promoting energy (ethanol) security, coupled with pricing disparities between sugar-based and grain-based ethanol, showcases a need for more coherent and integrated policy-making.
Geographical & Environmental
Sugarcane is a water-intensive crop, making its cultivation in the semi-arid regions of Vidarbha and Marathwada geographically and environmentally unsustainable. The article highlights the looming threat of an [El Nino] event, which could trigger a drought and severely impact water availability, further stressing the agricultural sector. In response, the state government is promoting water conservation through schemes like the [Jalyukta Shivar Abhiyan] and encouraging crop diversification towards less water-dependent crops like millets and pulses. This situation is a classic example for UPSC mains on the conflict between the political economy of cash crops and the long-term imperative of aligning cropping patterns with agro-climatic zones for sustainable resource management. The effectiveness of schemes like Jalyukt Shivar has also been debated, with some reports questioning their impact on drought-proofing.