Sources say that India is considering raising the sugar floor price and ethanol rates in order to support mills.

Sources in government and the industry said that India was considering raising the price floor for sugar sold on the domestic market. This is part of an effort to assist mills with surplus stocks.

Sources said that the government of Prime Minister Narendra Modi could also increase the price at which oil firms buy ethanol from mills to mix with petrol.

These moves will help mills to avoid losses, and increase their ability to pay millions of sugar cane growers the fixed prices set by government.

A government source declined to name himself as he wasn't authorised to speak to the media.

Sugar companies are seeking to increase the 31 rupees-per-kilogram floor price set by the government, which has remained unchanged since 2019. This is because cane prices that mills pay farmers have increased 29% during this time.

Maharashtra, a western state in India, and Karnataka are neighbouring states that together produce over half of India's total sugar. They have asked the federal government for a higher sugar floor price to assist mills to pay cane prices on time to farmers.

If sugar prices continue to be under pressure, mills will struggle to pay for the cane price set by the government, according Prakash Naiknavare. He is the managing director of National Federation of Cooperative Sugar Factories.

Naiknavare stated that the mills need to be compensated for their losses by raising prices of sugar and ethanol.

Sugar mills also struggle with excess ethanol capacity.

Sugar-based ethanol accounted for only 28% out of the total biofuel allocation. The rest was allocated to plants that use grain feedstocks like rice and corn.

India allowed 1.5 million metric tonnes of sugar exports in the new season last week.

Trade and industry officials say that with food prices declining, inflation is no longer a problem, giving the government more room to increase sugar prices. (Reporting and editing by Mayank Bhardwaj, Frances Kerry and Rajendra Jadhav)

(source: Reuters)