Sugar's Minimum Selling Price

Think of sugar's Minimum Selling Price, MSP, as a rule that mills cannot sell sugar below a certain rupee-per-kilo floor, a mechanism specifically designed to stop desperate, cash-strapped mills from dumping sugar at unsustainably low prices just to generate quick cash flow, prices so low they'd leave mills unable to pay farmers the FRP and SAP covered elsewhere on this site.

The problem is that this floor has stayed completely fixed at Rs 31 per kilo since February 2019, while everything that goes into actually producing that kilo of sugar, cane costs under a rising FRP and SAP structure, labour, energy, has kept climbing, industry estimates now put the actual cost of production for the 2025-26 season at around Rs 40.24 per kilo, well above the legal minimum selling price.

That gap, a floor price roughly Rs 9 below estimated production cost, is exactly why the Indian Sugar Mills Association, ISMA, has been pushing the government to revise the MSP up to at least Rs 40.2 per kilo, arguing that an unchanged six-year-old floor no longer serves its original purpose of protecting mill viability when the cost side of the equation has moved so much further than the price side has.

Watching whether the government actually revises this MSP, something it has resisted doing for years despite the widening cost gap, is a genuinely useful signal for the health of the broader sugar mill sector, an MSP stuck well below production cost puts sustained pressure on mill cash flow, which flows directly through to the farmer payment delays and arrears covered elsewhere on this site.