Sugar industry seeks GST relief on biofuels as sugar output jumps 22% this season
The industry body has also sought targeted financial support for advanced biofuels such as sustainable aviation fuel (SAF), green bio-hydrogen, compressed biogas (CBG) and isobutanol blending with diesel, while proposing the transformation of sugar mills into integrated bio-energy hubs producing ethanol, gas, hydrogen and green power.
- Jan 16, 2026,
- Updated Jan 16, 2026 2:18 PM IST
With India’s sugar production recording a sharp increase in the ongoing 2025-26 season, the Indian Sugar and Bio-energy Manufacturers Association (ISMA) has called on the government to use the Union Budget 2026-27 to push tax rationalisation and policy support for biofuels and clean mobility, while also addressing rising financial stress in the sugar sector.
As of January 15, 2026, all-India sugar production has reached 159.09 lakh tonnes, nearly 22% higher than the 130.44 lakh tonnes produced during the same period last year. The number of operational sugar mills has also risen to 518, compared with 500 at the same stage a year ago, reflecting steady crushing progress across major producing states.
Maharashtra has emerged as the strongest performer, with sugar production at 64.50 lakh tonnes, marking a 51% year-on-year increase, supported by higher crushing rates and an increase in the number of operating mills. Uttar Pradesh has produced 46.05 lakh tonnes, around 8% higher than last year, while Karnataka has reported a 13% rise in output so far this season.
Despite the robust production trend, ISMA cautioned that mill finances are under growing pressure. Recent increases in sugarcane prices by several state governments have widened the gap between input costs and sugar realisations. Ex-mill sugar prices in key producing states such as Maharashtra and Karnataka have slipped to around ₹3,550 per quintal, significantly below the current cost of production. As inventories build up, the industry fears a rise in cane payment arrears unless corrective policy measures are taken.
In this context, ISMA has renewed its demand for an early revision of the Minimum Selling Price (MSP) of sugar, arguing that a cost-aligned MSP is critical to restoring financial viability, ensuring timely cane payments to farmers, and maintaining market stability — without adding to the government’s fiscal burden.
Alongside immediate market concerns, the association is pushing for longer-term structural reforms through the upcoming Union Budget. ISMA has proposed comprehensive GST rationalisation across the biofuels and clean mobility ecosystem, including sharp cuts in GST on flex-fuel vehicles, strong hybrid electric vehicles, higher ethanol blends such as E85 and E100, ethanol production machinery, and ethanol-based cookstoves.
The industry body has also sought targeted financial support for advanced biofuels such as sustainable aviation fuel (SAF), green bio-hydrogen, compressed biogas (CBG) and isobutanol blending with diesel, while proposing the transformation of sugar mills into integrated bio-energy hubs producing ethanol, gas, hydrogen and green power.
ISMA argues that with surplus ethanol capacity, established production infrastructure and technologies already validated in India, biofuels offer an immediate pathway to reduce emissions, cut fuel imports and stabilise rural incomes. As Budget 2026-27 approaches, the sugar industry is looking to the government to balance short-term relief with long-term clean energy policy support to ensure that a strong production season does not translate into financial stress for mills and farmers.
With India’s sugar production recording a sharp increase in the ongoing 2025-26 season, the Indian Sugar and Bio-energy Manufacturers Association (ISMA) has called on the government to use the Union Budget 2026-27 to push tax rationalisation and policy support for biofuels and clean mobility, while also addressing rising financial stress in the sugar sector.
As of January 15, 2026, all-India sugar production has reached 159.09 lakh tonnes, nearly 22% higher than the 130.44 lakh tonnes produced during the same period last year. The number of operational sugar mills has also risen to 518, compared with 500 at the same stage a year ago, reflecting steady crushing progress across major producing states.
Maharashtra has emerged as the strongest performer, with sugar production at 64.50 lakh tonnes, marking a 51% year-on-year increase, supported by higher crushing rates and an increase in the number of operating mills. Uttar Pradesh has produced 46.05 lakh tonnes, around 8% higher than last year, while Karnataka has reported a 13% rise in output so far this season.
Despite the robust production trend, ISMA cautioned that mill finances are under growing pressure. Recent increases in sugarcane prices by several state governments have widened the gap between input costs and sugar realisations. Ex-mill sugar prices in key producing states such as Maharashtra and Karnataka have slipped to around ₹3,550 per quintal, significantly below the current cost of production. As inventories build up, the industry fears a rise in cane payment arrears unless corrective policy measures are taken.
In this context, ISMA has renewed its demand for an early revision of the Minimum Selling Price (MSP) of sugar, arguing that a cost-aligned MSP is critical to restoring financial viability, ensuring timely cane payments to farmers, and maintaining market stability — without adding to the government’s fiscal burden.
Alongside immediate market concerns, the association is pushing for longer-term structural reforms through the upcoming Union Budget. ISMA has proposed comprehensive GST rationalisation across the biofuels and clean mobility ecosystem, including sharp cuts in GST on flex-fuel vehicles, strong hybrid electric vehicles, higher ethanol blends such as E85 and E100, ethanol production machinery, and ethanol-based cookstoves.
The industry body has also sought targeted financial support for advanced biofuels such as sustainable aviation fuel (SAF), green bio-hydrogen, compressed biogas (CBG) and isobutanol blending with diesel, while proposing the transformation of sugar mills into integrated bio-energy hubs producing ethanol, gas, hydrogen and green power.
ISMA argues that with surplus ethanol capacity, established production infrastructure and technologies already validated in India, biofuels offer an immediate pathway to reduce emissions, cut fuel imports and stabilise rural incomes. As Budget 2026-27 approaches, the sugar industry is looking to the government to balance short-term relief with long-term clean energy policy support to ensure that a strong production season does not translate into financial stress for mills and farmers.