The Maharashtra government is set to introduce a Soft Loan Scheme worth approximately ₹2,000 crore for cooperative sugar mills, modelled on the Central government's policy framework, aimed at restoring financial stability to the sector and ensuring timely Fair and Remunerative Price (FRP) payments to sugarcane farmers. Deputy Chief Minister Sunetra Pawar has directed officials to place a formal proposal before the State Cabinet for approval without delay.

Key Features of the Soft Loan Scheme

Under the proposed scheme, eligible cooperative sugar mills will gain access to a low-interest loan corpus of roughly ₹2,000 crore, repayable over a 7-year window. The state government will absorb the annual interest burden — estimated at approximately ₹100 crore per year. Disbursements will be routed through District Central Cooperative Banks (DCCBs) and the Maharashtra State Cooperative Bank (MSCB), with each mill's crushing capacity and financial health assessed before funds are released.

Why the Intervention Is Urgent

State sugar mills are currently grappling with severe liquidity stress, with outstanding FRP dues of around ₹200 crore owed to farmers from the previous crushing season. The central government's FRP framework mandates that mills pay farmers within 14 days of cane delivery — a timeline that routinely clashes with the slower pace of domestic sugar sales realisations, creating recurring working capital shortfalls. The soft loan infusion is designed to help mills clear pending arrears and enter the upcoming crushing season on stable footing.

A Standalone By-Product Policy on the Anvil

Deputy Chief Minister Pawar also directed officials to draft a comprehensive, standalone policy dedicated to sugar by-products — a move intended to reduce the industry's dependence on raw sugar and open alternative revenue streams. The policy roadmap is expected to accelerate manufacturing and processing capabilities across solar power, co-generation electricity, first-generation (1G) and second-generation (2G) ethanol, Compressed Bio-Gas (CBG), Green Hydrogen, and Sustainable Aviation Fuel (SAF).

Speaking at a high-level review meeting on Tuesday, Pawar said that diversification into value-added by-products would build long-term economic resilience, create new revenue channels, and shield sugarcane farmers from seasonal price volatility.

The Structural Challenge Behind the Crisis

Sugarcane occupies roughly 4% of Maharashtra's cultivated land yet consumes an estimated 60–70% of the state's irrigation water — a disproportion that has fuelled ongoing debates over crop diversification and drip irrigation mandates. Overproduction in bumper years depresses domestic prices, forcing state and central intervention through export quotas and concessional loans to prevent defaults on farmer payments. This is not the first time Maharashtra has leaned on soft loan mechanisms; the recurrence underscores the structural fragility of a sector caught between regulated output prices and market-linked input costs.

The Shift Toward Integrated Biorefineries

Mills are increasingly pivoting to integrated biorefineries to insulate revenues from sugar price volatility. Converting B-heavy molasses and direct sugarcane juice into ethanol under India's Ethanol Blending Programme (EBP) offers faster liquidity than white sugar sales. Burning bagasse — the fibrous residue left after crushing — generates renewable power for internal use and grid supply. Expansion into CBG, Green Hydrogen, and SAF aligns with state plans to modernise factory revenue models well beyond raw sugar production, and with India's broader clean energy transition targets.

With Cabinet approval pending, the sector will be watching closely to see whether the scheme's design includes verifiable farmer payment milestones — the mechanism most likely to determine whether the liquidity injection actually reaches growers on time.