Raising cane prices without revising the Minimum Selling Price of sugar endangers the viability of sugar mills. Critically analyse.

The Fair and Remunerative Price (FRP) of sugarcane, approved by the CCEA, rose from ₹355/qtl in 2025-26 [2] to ₹365/qtl for 2026-27 [3]. The Centre has now set up the Ramesh Chand panel, which must weigh farmers' cane price demands against a revision of the ex-mill Minimum Selling Price (MSP) of sugar and the "financial viability of mills" [1]. The statement is largely valid, but it is incomplete.

Why the claim holds

• Cost–price squeeze: FRP is a binding floor on the mills' biggest cost, cane. The sugar MSP is the floor on what they earn. If FRP rises 4.41% in a season [2] while the MSP stays frozen, mill margins shrink.
• Recovery-linked burden: mills pay a premium of ₹3.46/qtl for every 0.1% of recovery above 10.25% [2]. High-recovery belts such as Maharashtra and Karnataka therefore carry a heavier cost.
• Policy-shaped revenues: sugar trade and stocks are regulated. For example, bulk consumers may hold extra stock only from imported sugar under AAS/TRQ [5]. Mills cannot freely pass on higher costs.
• Official recognition: the panel's terms of reference explicitly link the sugar MSP to output cost, market realisation and mill viability [1].

Why it is overstated

• Modest hikes: the 2026-27 FRP rise is only about 2.8% [3]. Farmers argue that their cultivation costs are rising faster [1].
• MSP is only a floor: when open-market sugar prices are above the MSP, a mill's viability depends on market conditions, not the MSP.
• Diversified income: ethanol diversion, power co-generation and molasses give mills other sources of revenue.
• Internal inefficiency: old plants, low recovery and weak management also hurt mill finances, whatever the prices.
• Process gaps that hurt farmers: the panel is also examining recovery testing and cane weighment [1]. This suggests mills sometimes gain at farmers' expense.
• Consumer trade-off: raising the sugar MSP pushes costs on to households.

Way forward

• Revise the sugar MSP periodically, in line with FRP.
• Consider a revenue-sharing formula, as the Rangarajan Committee suggested.
• Use digital weighment and third-party recovery testing.
• Keep the 9.5% recovery floor (₹329.05/qtl) [2] that protects farmers in low-recovery areas.

Mill viability and farmer welfare depend on each other: a mill in financial stress builds up unpaid cane dues, which hurts farmers too. The answer is not to choose between the cane price and the sugar price. Linking both through transparent, rule-based pricing would protect farmers and mills, in line with the goals of SDG 2 and SDG 8.