₹22 lakh crore spent yearly on fossil fuel imports, against an Indian sugar production cost of ₹33-34/kg versus Brazil's ₹23/kg: the arithmetic behind Gadkari's pivot
NEW DELHI: Union Minister for Road Transport and Highways Nitin Gadkari told India’s sugar industry leadership on September 24, 2026 that the era of relying primarily on white crystal sugar has ended, urging mills to transform into multi-product bio-refineries producing compressed bio-gas, sustainable aviation fuel and organic bio-manure alongside their existing ethanol operations. Speaking at the National Efficiency Awards ceremony organised by the National Federation of Cooperative Sugar Factories, Gadkari did not mince words: “The future of plain sugar is mediocre at best. I won’t mince words: diversifying into complementary by-products guarantees a strong future.”
The minister grounded his call in stark economic terms. India produces 300 to 350 lakh metric tonnes of sugar annually against domestic consumption of only 280 to 300 lakh metric tonnes, a structural surplus that depresses prices. Making matters worse, Indian sugar production costs run between ₹33 and ₹34 per kg, compared to ₹23 per kg in Brazil, effectively pricing Indian mills out of competitive global export markets without subsidy support.
Why Road Ethanol Alone Won’t Absorb the Surplus
Gadkari’s timing is deliberate. India’s Ethanol Blended Petrol programme has been a genuine success story, pushing average blending to 19.05% by July 2025, with the national E20 target advanced four years ahead of schedule to the current ethanol supply year. Since 2014, the programme has delivered foreign exchange savings of approximately ₹1.59 lakh crore and substituted 270 lakh metric tonnes of crude oil imports. But that success has a hard ceiling: conventional engines cannot safely run on ethanol blends above 20% without risking fuel system corrosion, capping total national ethanol demand at roughly 1,000 to 1,200 crore litres annually. As distillation capacity continues expanding, the industry now faces the prospect of a second glut, this time in ethanol rather than sugar, unless new large-scale demand channels emerge.
Bio-Gas: The Nearer-Term Opportunity
Compressed Bio-Gas offers what Gadkari described as substantial untapped potential. India has the technical capacity to produce 50,000 tonnes of CBG daily, yet current production fulfils barely 2% of that capacity. Of 1,908 registered CBG plants nationwide, only 132 are actually operational. For sugar mills specifically, press mud, the nutrient-rich byproduct left over from juice clarification, offers an ideal feedstock; a mill crushing 5,000 tonnes of cane daily generates roughly 200 tonnes of press mud, enough to run a dedicated biogas plant without competing for cane or land. A mandatory blending obligation for city gas distributors already exists, rising in stages from 1% in FY26 to 5% by FY29, backed by a fixed procurement price of ₹106 per kg. Gadkari suggested a fully realised CBG sector could inject ₹2.5 lakh crore into the rural economy and create up to 15 lakh jobs, while the Cabinet-approved GOBARdhan scheme carries a ₹23,731 crore outlay through FY36 to scale this up tenfold.
Aviation Fuel: The Longer Bet
Sustainable Aviation Fuel represents the more distant, technically demanding piece of Gadkari’s vision. International rules under the ICAO’s carbon offsetting scheme require SAF blending in international flights starting in 2027, with indicative targets rising from 1% that year to 5% by 2030. For sugar mills, the Alcohol-to-Jet pathway, converting ethanol into synthetic jet kerosene through dehydration and hydrotreating, offers a plausible route using existing distillation infrastructure. However, it is worth noting that Gadkari’s speech did not specify exact processing technologies, nor did it announce new capital subsidies or a mandatory SAF off-take scheme for sugar mills, meaning this remains directional signalling rather than a funded programme at this stage.
The Money Problem Standing in the Way
Underlying all of this is a genuine financial squeeze. While the government raised the statutory sugarcane price farmers must be paid by 29.8% between 2019 and 2026, reaching ₹365 per quintal for the current season, the minimum selling price for white sugar has remained frozen at ₹31 per kg since February 2019. Because banks calculate mill loan limits based on this frozen MSP rather than actual market prices, cooperative mills have seen their working capital borrowing capacity steadily erode, precisely as they are being asked to fund capital-intensive diversification. A press-mud CBG plant alone costs ₹35 to 50 crore to install, and Alcohol-to-Jet refineries require considerably more. Industry bodies including ISMA and NFCSF have repeatedly pushed for the sugar MSP to rise to ₹37.50 to ₹42 per kg to ease this constraint.
Signal Versus Substance
It is worth being clear about what Gadkari’s address actually represents. As Minister of Road Transport and Highways, Gadkari does not control the ministries that would need to act to make this vision real. The Ministry of Petroleum and Natural Gas would need to notify pricing formulas for ATJ-produced SAF, the Ministry of Civil Aviation would need to certify airport blending infrastructure, and the Department of Food and Public Distribution would need to revisit the frozen sugar MSP. None of these steps have yet been taken. Gadkari’s speech, however forcefully worded, functions as policy signalling meant to shape mill-level investment decisions rather than a notified, funded programme.
What to Watch
Whether this vision advances will hinge on a handful of concrete developments: any CCEA notification revising the sugar MSP above ₹31 per kg, enforcement action against city gas distributors missing their CBG blending targets, publication of an actual pricing framework for ATJ-produced aviation fuel, and whether listed sugar companies such as Balrampur Chini or Triveni Engineering announce firm capital investments in press-mud biogas or SAF refining capacity. Until those pieces fall into place, Gadkari has defined a destination for India’s sugar sector without yet building the road to get there.
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