Karnataka Chief Minister D.K. Shivakumar has written to Prime Minister Narendra Modi seeking an increase in the Minimum Selling Price (MSP) of sugar and a review of the Centre’s restrictions on ethanol production from sugarcane-based feedstocks for the 2026-27 Ethanol Supply Year (ESY).
The letter follows consultations with protesting sugarcane farmers and sugar mill representatives. Shivakumar has argued that revising sugar prices and restoring flexibility in ethanol production are important to improving mill revenues and ensuring timely payments to farmers.
As reported by The Hindu, the Chief Minister also raised concerns over delayed cane crushing in Karnataka, with drought-related conditions expected to affect sugarcane yields this year.
Karnataka seeks revision of sugar’s Minimum Selling Price
Shivakumar pointed out that the sugar MSP has remained unchanged at ₹31 per kg since 2019, while the Fair and Remunerative Price (FRP) paid to sugarcane farmers has increased from ₹2,750 to ₹3,650 per tonne over the same period.
He also cited a prevailing sugar selling price of around ₹45 per kg, arguing that an increase in the MSP would not necessarily translate into higher prices for consumers.
The Chief Minister said representatives of sugar mills had assured farmers at a meeting convened in Belagavi on October 26 that any additional revenue generated through an MSP increase would be passed on to them.
Ethanol restrictions raise concerns over mill revenues
A major concern in the letter is the Union Department of Food and Public Distribution’s directive dated October 22, 2026, which restricts the production of ethanol from sugarcane juice, sugar syrup and B-heavy molasses during ESY 2026-27.
According to the figures cited by Shivakumar, Karnataka’s cane-based distilleries earned ₹5,803.70 crore from ethanol in 2025-26, with almost all of this revenue coming from the three feedstock routes covered by the new restriction.
He argued that these earnings had helped sugar mills make payments to farmers within 14 days. The latest directive, he said, could affect mills’ ability to maintain that payment schedule.
The Chief Minister has therefore asked the Centre to reconsider the restrictions and revise the administered prices of cane-based ethanol. He noted that ethanol prices for production from sugarcane juice and B-heavy molasses have remained unchanged since ESY 2022-23.
Chief Minister raises additional demands on sugar pricing
Beyond the sugar MSP and ethanol-related requests, Shivakumar has called for changes to other elements of the sugarcane pricing framework.
His proposals include the restoration of the FRP base recovery rate to 9.50%, introduction of separate sugar MSPs, revising the revenue-sharing formula and to establish a Price Stabilisation Fund. He also sought the creation of such a fund, citing recommendations from the NITI Aayog Task Force and the Commission for Agricultural Costs and Prices (CACP).
Shivakumar further referred to the Central Committee chaired by Ramesh Chand, which had heard representations from sugarcane farmers and experts. The Karnataka government, he said, had submitted its own detailed representation to the committee.
Delayed crushing season adds pressure on farmers
The Chief Minister said the State government had acted on farmers’ demands that fell within its jurisdiction, while several other requests required decisions from the Centre.
Farmers are awaiting assurances on these outstanding issues as the cane-crushing season has been delayed. The prospect of lower sugarcane yields due to drought conditions has added to concerns over the sector’s outlook this year.
The requests now place sugar pricing, ethanol procurement policy and the distribution of mill revenues among the key issues requiring attention from the Union government.
Bioenergy Business Analysis
The Karnataka government’s demands highlight the close relationship between sugar-sector economics and India’s ethanol blending programme. For sugar mills, ethanol sales provide an additional revenue stream alongside sugar and cogeneration, while also creating an outlet for certain sugarcane-derived feedstocks.
The issue reflects a broader policy challenge: balancing ethanol supply requirements, sugar availability, consumer prices and farmer incomes. A revision of sugar MSP or ethanol prices could alter the economics of the sector, but the impact would depend on the final policy decisions and how additional revenue is distributed.
The Centre’s response to Karnataka’s requests will be important for the state’s sugar mills and farmers as the 2026-27 crushing and ethanol supply seasons progress. For now, the demands remain proposals made by the State government, not approved policy changes.
