Sugar and SugarCane Policy
- Sugar industry is an important agro –based industry that impacts rural livelihoods of about 50 million Sugarcane farmer and around 5 lakh workers directly employed in sugar mills. Employment is also generated in various ancillary activities relating to
transport, trade servicing of machinery and supply of agriculture inputs. India is the second largest producer of sugar in the world after Brazil and is also the largest consumer. Today Indian sugar industry's annual output is worth approximately Rs.80,000
- There are 682 installed sugar factories in the country as on 30/11/2012, with sufficient crushing capacity to produce around 300 lakh MT of sugar. The capacity is roughly distributed equally between private sector units and co-operative sector units. The
capacity of sugar mills is, by and large, in the range of 2500 TCD - 5000 TCD bracket but increasingly expanding and going even beyond 10000 TCD.
- Two standalone refineries have also been established in the country in the coastal belt of Gujarat and west Bengal which produce refined sugar mainly from imported raw sugar as also from indigenously produced raw sugar.
- The sector-wise break-up of sugar mills in the country is as given below:
||Number Of Factory
* Includes closed sugar mills and refineries also.
Sugarcane pricing policy
- With the amendment of the Sugarcane (Control) Order, 1966 on 22/10/2009, the concept of Statutory Minimum Price (SMP) of sugarcane was replaced with the ‘Fair and Remunerative Price (FRP)' of sugarcane for 2009-10 and subsequent sugar seasons. The cane
price announced by the Central Government is decided on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP) after consulting the State Governments and associations of sugar industry. The amended provisions of the Sugarcane
(Control) Order, 1966 provides for fixation of fair and remunerative price of sugarcane having regard to the following factors
- Cost of production of sugarcane
- Return to the growers from alternative crops and the general trend of prices of agricultural commodities
- Availability of sugar to consumers at a fair price
- Price at which sugar produced from sugarcane is sold by sugar producers
- Recovery of sugar from sugarcane
- *The realization made from sale of by-products viz. molasses, bagasse and press mud or their imputed value
(* inserted vide notification dated 29/12/2008)
- **Reasonable margins for the growers of sugarcane on account of risk and profits.
(**inserted vide notification dated 22/10/2009)
- Under the FRP system, the farmers are not required to wait for the end of the season or for any announcement of the profits by the sugar mills or the Government. The new system also assures the margins on account of profit and risk to farmers in all the
years, irrespective of the fact whether the sugar mills generate profit or not and is not dependent on the performance of any individual sugar mill.
- In order to ensure that higher sugar recoveries are adequately rewarded and considering variations amongst sugar mills, the FRP is linked to a basic recovery rate of sugar, with a premium payable to farmers for higher recoveries of sugar from sugarcane.
- Accordingly, FRP for 2012-13 sugar season was determined at Rs.170/- per quintal linked to a basic recovery rate of 9.5% subject to a premium of Rs.1.79 per quintal for every 0.1 percentage point increase in recovery above that level. The FRP for 2013-14
sugar season has been fixed at `210/- per quintal linked to a basic recovery rate of 9.5% subject to a premium of `2.21 per quintal for every 0.1 percentage point increase above that level. The SMP of sugarcane payable by sugar factories for each sugar season
from 2005-06 to 2008-09 and FRP for 2009-10 to 2013-14 has been shown in the following table :
||SMP (Per quintal)
||Basic Recovery Level
Cane Price Arrears
- The payment to sugarcane farmers by sugar mills, though statutorily supported by various statutes and enforced by State Governments, gets affected by the dynamics of domestic market price as well as international situation related to export possibilities.
Despite, the sugar production in the country being more than domestic requirements for the last two sugar seasons and also expected to be sufficient to meet domestic requirements during 2012-13, due to timely interventions, the cane price arrears could be
kept to minimum during these seasons.
- The position of cane price payment and arrears for sugar season 2012-13, as on 31/12/2012, is as under:
|Cane Price Payable
|Cane Price Paid
|Cane Price Arrears
|Percentage of Cane Price Arrears on Cane Price Payable
Sugar is an essential commodity under the Essential Commodities Act, 1955. The Central Government has been following a policy of partial control and dual pricing for sugar. Under this policy, a certain percentage of sugar produced by sugar factories (raised
to 20% for 2009-10 sugar season and revised to 10% for 2010-11 season and 2011-12 sugar season) is requisitioned by the Government as compulsory levy at a price fixed by the Central Government in every sugar season. Levy sugar is distributed under the Public
Distribution System (PDS) at a uniform retail issue price throughout the country. The non-levy (free sale) sugar is allowed to be sold as per the quantity released by the Central Government under the regulated release mechanism. During the year 2012-13, releases
were announced on a quarterly basis to give greater flexibility to the sugar mills in their inventory management.
Levy Sugar Obligation
The Central Government vide Notification dated 07/10/2009 increased the levy quota percentage for the year 2009-10 from 10% to 20% of sugar production by domestic producers in 2009-10 season to enable the Central Government to fulfill its commitment of supplying
levy sugar for PDS and the Military/Para Military forces. The increase in levy obligation was necessitated in view of the sharp drop in sugar production to about 147 lakh tons in 2008-09 and the earlier expected low production of about 160 lakh tons in 2009-10
season. However, levy obligation from domestic sugar factories have been reduced to 10% for 2010-11 sugar season vide Notification dated 24/09/2010, in view of higher production of sugar in 2010-11 sugar season. Vide notification dated 25/11/2011, the levy
obligation from domestic sugar factories has been retained at 10% till further orders.
Levy Price of Sugar
Under Section 3(3C) of the Essential Commodities Act, 1955, the price of the levy sugar (upto sugar season 2008-09) is required to be determined by the Central Government. However, Section 3(3C) of the Central Government has been amended vide Notification
dated 22/12/2009 for determination of price price of levy sugar from 2009-10 sugar season. The prices are determined having regard to:
- The minimum price, if any, fixed for sugarcane by the Central Government upto sugar season 2008-09 and Fair and Remunerative Price (FRP) from 2009-10 sugar season onwards under this section
- The manufacturing cost of sugar
- The duty or tax, if any, paid or payable thereon and
- The reasonable return on the capital employed in the business of manufacturing sugar.
The sugar subsidy is paid towards reimbursement of expenditure incurred by the State Governments on lifting, transportation and distribution of sugar plus the wholesaler and retailers margins minus the amount collected from the sale of levy sugar at the
Retail Issue Price (RIP) are reimbursed to the State Governments by the Central Government through FCI. In effect, the full sugar subsidy on account of PDS operations is met by Government of India. The annual requirement of subsidy on this account is around
`3000 crore on present levy prices of sugar. The retail issue price of levy sugar under PDS in the country is `13.50 per kg since 01/03/2002.
Ethanol Blended Petrol Programme(EBP Programme)
- Ethanol is an agro-based product, basically produced from the by-product of the sugar industry, viz. molasses. In the years of surplus production of sugarcane, when the sugar prices are depressed, the sugar industry is unable to pay cane price to the farmers.
This is mainly due to surplus production of sugar. The EBP programme, besides lowering pollution levels, is expected to provide another outlet for ethanol use, thus insuring utilization of molasses produced as a by- product during manufacture of sugar. This
would improve the revenue stream of the sugar mills.
- Ethanol Blended Petrol (EBP) Programme has been taken up since the year 2007 The Cabinet Committee on Economic Affairs at its meeting held on 22/11/2012, considered the recommendations of the Group of Ministers on the reports of the Expert Committee on
Pricing of Ethanol and the Economic Advisory Council to the Prime Minister, and approved that the procurement price of ethanol will not be fixed by the Government and will be decided henceforth between the oil marketing companies and the suppliers of ethanol.
Pursuant to the above Cabinet decision, Ministry of Petroleum & Natural Gas have issued a Gazette Notification dated 02/01/2013 for implementation of 5% mandatory ethanol blending with petrol across the Country.
Report of the Dr. C. Rangarajan Committee on sugar sector
The committee headed by Dr. C. Rangarajan on Sugar Industry submitted its report to the Government on 5th October, 2012. The Committee, inter-alia, recommended removal of the levy sugar obligation and dispensing with the regulated release mechanism
on non-levy sugar, rationalisation of sugarcane pricing, abolition of cane area reservation system and bonding, doing away with the minimum distance norms as States discontinue cane area reservation, liberalisation of sugar trade, market determination of prices
of by-products with no earmarked end use allocations and taking out sugar from the purview of Jute Packaging Material (Compulsory use in Packaging Commodities) Act, 1987. The recommendations of the Committee are under consideration of the Government.