Gadkari sugar surplus, ethanol pivot for mills

Nitin Gadkari’s latest remarks on the sugar industry are driving a fresh round of debate across social media and investor circles, especially around ethanol, CBG, and farmer payments. Speaking at events hosted by the National Federation of Cooperative Sugar Factories and industry bodies, he argued that sugar-only operations are increasingly unviable under global price discovery.

What Gadkari told cooperative sugar mills

Gadkari said standalone sugar production is no longer economically viable because sugar operates in a globalised market. He told cooperative mills that depending only on sugar is unworkable and that the future of plain sugar is “mediocre at best.” He urged mills to pivot aggressively toward by-products such as ethanol, compressed biogas (CBG), bio-manure, and sustainable aviation fuel. He framed the shift as an economic necessity rather than a choice, linking it to both mill viability and farmer incomes. He also responded to demands for a higher minimum support price for sugar by saying governments have no role in setting such rates in a global economy. To make the point, he said sugar rates are decided in Brazil, corn rates in America, and palm oil prices in Malaysia. In multiple remarks, he positioned energy-linked by-products as the main avenue for “unlimited opportunities” for mills.

Surplus output versus domestic consumption pressures prices

Gadkari highlighted that India produces about 300 to 350 lakh tonnes of sugar against domestic consumption of around 280 to 300 lakh tonnes. He linked this surplus to depressed sugar prices, arguing that oversupply keeps prices stable even when costs rise elsewhere. In another remark, he attributed a recent price rise to a shortage, implying price behaviour swings with availability. The core message was that surplus conditions make it hard for mills to protect margins through sugar alone. He also argued that global supply shifts, especially in Brazil, can quickly transmit into Indian pricing. That linkage is central to why he asked mills to plan beyond sugar cycles. He warned mills they cannot sustain operations by relying solely on sugar. He said mills should keep growing sugarcane but develop projects to convert cane juice directly into ethanol.

Cost gap with Brazil and global price discovery

Gadkari repeatedly contrasted production economics in Brazil and India to explain competitive pressure. He said Brazil’s sugar production cost is about Rs 23 per kg, while India’s cost is about Rs 33 to Rs 34 per kg in one account and nearly Rs 32 per kg in another. He attributed Brazil’s lower costs to large land parcels of roughly 2,000 to 3,000 acres and mechanisation. He also said if Brazil has surplus sugar, prices in India drop, and if Brazil faces a shortage, prices rise here. In this framing, mills face a cost-price mismatch when global benchmarks are weak. He also said production costs in India have gone beyond the sale price, pushing many factories into heavy losses. He cited the impact on his own cooperative units, saying four sugar plants in Vidarbha lose nearly ₹40 crore every year. Separately, he said the government has fixed the maximum sale price at ₹32 per kg.

By-products strategy: ethanol, CBG, bio-manure, SAF

Across his speeches, Gadkari pushed a portfolio approach rather than a single-product model. He specifically named ethanol, CBG, bio-manure, and sustainable aviation fuel as priority by-products. He said ethanol and biofuel production can reduce dependence on imported fossil fuels while creating new income streams for farmers and mills. He cited India’s fossil fuel import bill at ₹22 lakh crore annually, arguing that domestic biofuels can redirect some of that spending into rural incomes. He also said the sugar industry is uniquely positioned to support clean-energy goals through renewables derived from sugarcane and its by-products. In Pune, he said the Centre would soon address pending concerns of the sector and that decisions were being examined. He also linked diversification to rural livelihoods, saying the sector affects farmers and rural jobs across 179 Lok Sabha constituencies. He expressed concern about migration from villages to cities and suggested bioenergy-linked jobs could help. The repeated thrust was that mills should build resilience by monetising multiple outputs from the same cane value chain.

Bagasse, cogen power, and why Gadkari prefers CBG

Gadkari argued that using bagasse for co-generation power at the current rate is not viable. He said the fibrous residue of sugarcane could be better used to produce CBG. He added that the government has committed to buying CBG at a remunerative price, making it a more bankable route than power sales under current economics. This view matters because bagasse economics influence both mill cash flows and broader renewable strategies. His comments also signal a preference for transport and gas applications where policy-backed offtake can support projects. The idea of assured buying was central to the pitch, as it lowers market risk for mills. He presented CBG as an “energy sector” opportunity with large headroom for scaling. He positioned biomass value addition and organic manure as sustainable drivers beyond commodity sugar. The social media discussion around this point has focused on whether mills can execute capex-heavy pivots quickly.

Recovery improvement and the Rs 50,000 to 60,000 crore claim

Gadkari asked mills to focus on improving recovery, calling it a key operational lever. He said a 1 percent additional recovery could translate into an additional Rs 50,000 crore to Rs 60,000 crore in a year. The figure is being debated online, but his intent was to highlight the scale of value locked in efficiency gains. Recovery improvements can also support downstream by-products because more output is extracted from the same input. He presented this as an industry-wide opportunity rather than a single company’s advantage. His comments were delivered at an efficiency awards ceremony, aligning the message with operational performance. He framed recovery not as a technical footnote but as a core profit driver. Combined with by-product monetisation, he argued recovery gains could strengthen mill economics materially. The takeaway for market watchers is that operational metrics could matter as much as sugar price moves.

Farmer payments, cane pricing, and the diversification promise

Gadkari linked by-product utilisation to stronger cane payments to farmers. He said diversification could allow sugar mills to eventually pay farmers up to Rs 6,000 per tonne of sugarcane instead of the current Rs 4,000. In another remark, he said economic viability through by-products would enable mills to pay Rs 600 per quintal to farmers. He also pointed to structural stress where cane prices rise while sugar selling prices stay unchanged. He said factories must pay farmers within 15 days, which tightens working capital when sugar realisations are under pressure. He also said mills are required to sell sugar in monthly quantities equal to 10 percent of their stock throughout the year. These obligations, combined with capped or globally influenced pricing, were presented as reasons mills need alternative revenue lines. Separately, the government said diversion of sugarcane has declined from around 12 percent in 2022-23 to about 9 percent in 2025-26, though the same discussion noted “the damage was done.” Social chatter has largely centred on whether by-products can consistently fund higher cane payouts across cycles.

Policy signals and the political debate around ethanol

Gadkari said the sugar industry has survived due to ethanol, repeating that mills and cultivators have “survived just because of the advent of ethanol” in a surplus sugar environment. He also said there is a need for new technologies in farming, linking productivity to long-term sustainability. At the same time, his ethanol advocacy has attracted political pushback, with the Congress alleging a conflict of interest and claiming he was “aggressively lobbying” for ethanol while his sons were involved in ethanol-producing firms. The allegation has been widely discussed online alongside his policy messaging. Gadkari also said the Centre was examining the sector’s concerns and would take a decision soon, without detailing measures. His broader claim was that in a global commodity market, seeking price setting tools like MSP may not work as expected. Instead, he urged structural shifts into energy-linked products with clearer demand pathways. For investors and consumers, the key policy question is how quickly by-product capacity can expand without disrupting domestic sugar availability. The immediate market implication is that diversification narratives are likely to remain a central theme for Indian sugar-sector discussions.