CM writes to PM seeking revision of sugar MSP, order on ethanol production

D.K. Shivakumar is asking Prime Minister Narendra Modi to revise sugar’s Minimum Selling Price, unchanged at ₹31 per kg since 2019. He says mills have agreed to pass any increase on to farmers. He also wants the Centre to change its restriction on ethanol made from sugarcane juice, syrup and B-heavy molasses during Ethanol Supply Year 2026-27.

The Chief Minister says Karnataka’s distilleries earned ₹5,803.70 crore from ethanol in 2025-26, almost entirely through those routes. That income helped mills pay farmers within 14 days. He is also seeking a higher price for cane-based ethanol, unchanged since 2022-23, and restoration of the 9.50% FRP recovery base.

Shivakumar argues sugar’s selling price is already ₹45 per kg, so a higher MSP need not increase consumer prices. He further proposes separate domestic and commercial MSPs, a revised revenue-sharing formula, and a Price Stabilisation Fund. These requests require action in areas he identifies as the Centre’s domain.

The Minimum Selling Price, or MSP, is the floor price discussed for selling processed sugar. It matters because mills say the current floor does not reflect rising costs and cane payments. The article states that sugar’s MSP has remained ₹31 per kg since 2019, even though sugar was selling at ₹45 per kg.

The Fair and Remunerative Price, or FRP, applies to the sugarcane that farmers supply to mills. It is not the price of finished sugar. The article says cane FRP rose from ₹2,750 to ₹3,650 per tonne during the same period. That increase raised mills’ payment obligations while sugar’s official minimum selling price stayed unchanged.

The two prices are linked through the mill’s finances. Mills turn cane into sugar and other products, then use sales revenue to pay farmers. Shivakumar says raising sugar’s MSP could improve returns and that mills have promised to pass increases to farmers, without necessarily raising consumer prices.

Since 2019, sugar’s MSP has remained fixed at ₹31 per kg. The article presents this as a widening gap because mills’ payment obligations increased while the official minimum selling price did not. Sugar was selling at ₹45 per kg, according to the Chief Minister’s letter.

Cane FRP moved in the opposite direction. It rose from ₹2,750 per tonne to ₹3,650 per tonne during the same period. That is an increase of ₹900 per tonne. FRP therefore became more expensive for mills, while the sugar MSP remained unchanged.

Ethanol provided another important revenue stream. Karnataka’s cane-based distilleries earned ₹5,803.70 crore in 2025-26, almost entirely from sugarcane juice, syrup and B-heavy molasses. The Chief Minister says this income helped mills pay farmers within 14 days. The figures explain why Karnataka wants both sugar and ethanol pricing reviewed.

The Union Department of Food and Public Distribution directed on October 22, 2026, that ethanol could not be produced from sugarcane juice, syrup and B-heavy molasses during Ethanol Supply Year 2026-27. Karnataka’s Chief Minister says this decision threatens mills’ cash flow because those routes had generated major income.

The concrete figure is ₹5,803.70 crore. Karnataka’s cane-based distilleries earned nearly all of that amount through the restricted routes in 2025-26. That income helped sugar mills pay farmers within 14 days. Removing it can reduce the money available for prompt cane payments, especially while cane costs and FRP have risen.

Shivakumar says the directive has already come in the way of payments to farmers. He is asking the Prime Minister to change the rule and revise cane-based ethanol prices, which have remained unchanged since 2022-23 for juice and B-heavy molasses. The outcome could affect payment timing and farmer confidence.

The article distinguishes between demands Karnataka can pursue itself and decisions it says belong to the Centre. Shivakumar has written to the Prime Minister because revision of sugar’s MSP, the ethanol-production directive and cane-based ethanol prices require central action. He also asks for restoration of the 9.50% FRP recovery base and other central policy changes.

Karnataka’s government says it has already taken measures to implement farmers’ demands that fall within its domain. The article does not identify those measures individually. It says other demands, which are in the Centre’s domain, remain unimplemented. This division is why the State is seeking an assurance from the Union government.

The immediate disagreement concerns delayed crushing and threatened payment timelines. Karnataka wants the Centre to change the ethanol rule, revise sugar and ethanol prices, and consider revenue-sharing and stabilisation proposals. The State can continue its own measures, but the requested national policy decisions depend on central action.

Sugar mills and farmers are connected through the money generated from processing cane. Mills earn from sugar, ethanol and co-generated electricity. Shivakumar wants ethanol and co-generation revenue included in the revenue-sharing formula, so farmers can benefit from more than sugar sales alone. This matters when one product’s income weakens.

The article gives a clear example for ethanol. Karnataka’s distilleries earned ₹5,803.70 crore in 2025-26, almost entirely from cane juice, syrup and B-heavy molasses. That income helped mills pay farmers within 14 days. Sharing several revenue streams could make payments less dependent on sugar’s selling price.

The Chief Minister also seeks a Price Stabilisation Fund, a proposal recommended by the NITI Aayog Task Force and the Commission for Agricultural Costs and Prices. The article does not specify its design. Based on its stated purpose, such a fund would be intended to cushion market swings and support more stable returns, but its rules would need to be decided.

Sugarcane is the starting material for several products. Mills process it into sugar, while cane juice, syrup and B-heavy molasses can be used for ethanol. Mills can also generate electricity through co-generation. These outputs create revenue that supports payments to farmers who supplied the cane.

The article shows how the parts connect. Cane FRP rose to ₹3,650 per tonne, while sugar’s MSP stayed at ₹31 per kg. Ethanol income of ₹5,803.70 crore helped Karnataka mills pay farmers within 14 days. Recovery rates also matter: Shivakumar wants the FRP base restored to 9.50% so low-recovery areas are not penalised for soil and climate conditions.

Drought may reduce cane yields this year, and crushing has already been delayed. Lower yields can reduce available cane and factory output. At the same time, mills must protect farmer payments and avoid unnecessary consumer-price increases. That is why Karnataka seeks revised prices, revenue sharing and stabilisation measures.