Banner Divisions


Sugar industry is an important agro-based industry that impacts rural livelihood of about 50 million sugarcane farmers 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 crores. There are 735 installed sugar factories in the country as on 31.01.2018, with sufficient crushing capacity to produce around 340 lakh MT of sugar. The capacity is roughly distributed equally between private sector units and cooperative sector units.


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) in consultation with the State Governments and after taking feedback from associations of sugar industry. The amended provisions of the Sugarcane (Control) Order, 1966 provides for fixation of FRP of sugarcane having regard to the following factors:-

a) cost of production of sugarcane;

b) return to the growers from alternative crops and the general trend of prices

of agricultural commodities;

c) availability of sugar to consumers at a fair price;

d) price at which sugar produced from sugarcane is sold by sugar producers;

e)recovery of sugar from sugarcane;

f)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);

g) 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 till the end of the season or for any announcement of the profits by sugar mills or the Government. The new system also assures margins on account of profit and risk to farmers, irrespective of the fact whether 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 2017-18 sugar season has been fixed at Rs. 255 per qtl. linked to a basic recovery of 9.5% subject to a premium of Rs.2.68 per qtl for every 0.1 percentage point increase above that level.

The FRP of sugarcane payable by sugar factories for each sugar season from 2009-10 to 2017-18 is tabulated below:-

Sugar Season


(Rs. per quintal)

Basic Recovery Level





























The year 2013-14 was a water-shed for the sugar industry. The Central Government considered the recommendations of the committee headed by Dr. C. Rangarajan on de-regulation of sugar sector and decided to discontinue the system of levy obligations on mills for sugar produced after September, 2012 and abolished the regulated release mechanism on open market sale of sugar. The de-regulation of the sugar sector was undertaken to improve the financial health of sugar mills, enhance cash flows, reduce inventory costs and also result in timely payments of cane price to sugarcane farmers. The recommendations of the Committee relating to Cane Area Reservation, Minimum Distance Criteria and adoption of the Cane Price Formula have been left to State Governments for adoption and implementation, as considered appropriate by them. The gist of recommendations of the Committee and action taken by the Government thereon has been shown in Annexure-I to this Chapter.


Sugar was distributed through the Targeted Public Distribution System (TPDS) by the States/UTs at subsidized prices for which the Central Government was reimbursing @ 18.50 per kg of sugar distributed by the participating State Governments /UT Administrations. The scheme was covering all BPL population of the country as per 2001 census and all the population of the North Eastern States / special category/ hilly states and Island territories.

The National Food Security Act, 2013 (NFSA) is now being universally implemented by all 36 States/UTs. Under the NFSA, there is no identified category of BPL; however, the Antyodaya Anna Yojana (AAY) beneficiaries are clearly identified.The Government of India has reviewed the Sugar Subsidy Scheme and has decided that it is imperative to give access to consumption of sugar as a source of energy in diet, for the poorest of the poor section of the society i.e. AAY families. Accordingly, the Central Government has decided that the existing system of sugar distribution through PDS may be continued as per the following:-

(i) The existing scheme of supply of subsidized sugar through PDS may be continued for restricted coverage of AAY families only. They will be provided 1 kg of sugar per family per month.

(ii) The current level of subsidy at Rs. 18.50 per kg provided by the Central Government to States/UTs for distribution of sugar through PDS may be continued for the AAY population. The States/UTs may continue to pass on any additional expenditure on account of transportation, handling and dealers’ commission etc. over and above the retail issue price of Rs. 13.50 per kg to the beneficiary or bear it themselves.

Pursuant to the above decision, revised guidelines for reimbursement of sugar subsidy to States/UTs for distribution of sugar under PDS for AAY families have also been issued.


Ethanol is an agro-based product, mainly produced from a by-product of the sugar industry, namely molasses. In years of surplus production of sugarcane, when prices are depressed, the sugar industry is unable to make timely payment of cane price to farmers. The Ethanol Blending Programme (EBP) seeks to achieve blending of Ethanol with motor sprit with a view to reducing pollution, conserve foreign exchange and increase value addition in the sugar industry enabling them to clear cane price arrears of farmers.

The Central Government has scaled up blending targets from 5% to 10% under the Ethanol Blending Programme (EBP). The procedure of procurement of ethanol under the EBP has been simplified to streamline the entire ethanol supply chain and remunerative ex-depot price of ethanol has been fixed. To facilitate achieving of new blending targets, a "grid” which networks distilleries to OMC depots and details quantities to be supplied has been worked out. State-wise demand profile has also been projected, keeping in view distances, capacities and other sectoral demands. Excise duty has also been waived on ethanol supplies to OMCs for EBP by sugar mills during 2015-16 (up to 10 August, 2016). The results have been quite encouraging, with supplies doubling every year. In the year 2013-14, ethanol supplied for blending was only 38 crore litres, whereas in 2014-15, under the modified EBP supplies increased to 67 crore litres. In the ethanol season 2015-16, the ethanol supply has been historically high and has reached 111 crore litres achieving 4.2% of blending. In the ethanol season 2016-17, out of 80 cr litre contracted about 66.51 cr litre has been supplied. Further, in the ethanol season 2017-18, LOI has been issued for supply of 139.51 cr litres of ethanol, out of which agreement have been signed for 136 cr litres and about 46.25 cr litre has been supplied so far. In addition second round of tender has been opened by OMCs for bidding for procurement of 117 cr litre of ethanol under EBP.


The Government on 3.1.2014 notified a Scheme for Extending Financial Assistance to Sugar Undertakings (SEFASU-2014) envisaging interest free loans by bank as additional working capital to sugar mills, for clearance of cane price arrears of previous sugar seasons and timely settlement of cane price of current sugar season to sugarcane farmers. Rs. 6485.69 crore has been disbursed under the scheme. Interest burden on this loan, for five years is borne by the Government through Sugar Development Fund. An amount of Rs. 2330.96 Cr has been released to the banks for subvention of interest on the loan availed by the sugar factories.


A scheme was notified on 23.6.2015 to provide soft loan to sugar mills to facilitate clearance of cane price arrears of sugar season 2014-15. Rs. 4213 Cr of soft loan have been disbursed by the banks under the scheme. Interest subvention upto 10% p.a. during moratorium period of one year is borne by the Government. About 32 lakh farmers have been benefitted. An amount of Rs.431.70 crore has been released to the banks for subvention of interest on the loan availed by sugar factories.


The Government vide notification dated 2.12.2015 has also extended production subsidy @ Rs. 4.50 per quintal to sugar mills to offset cost of cane and facilitate timely payment of cane price dues of farmers for the sugar season 2015-16. Consequent upon sugar prices reaching substantially higher levels than required for operational viability of the sugar industry, the Central Government had withdrawn production subsidy scheme vide notification dated 19.05.2016. Since the production subsidy scheme was withdrawn before time, the Central Government has decided to disburse the performance based production subsidy for cane crushed during 2015-16 sugar season till the tenancy of the scheme vide notification dated 12.09.2016. Under the scheme, so far Rs. 520 crores have been disbursed as production subsidy to 213 sugar mills.


With a view, to keep the sugar prices at reasonable level and to ensure smooth supply of sugar for consumers, the Central Government imposed stock holding and turn over limits on dealers of sugar vide Gazette notification dated 29.4.2016. The directions were issued that no dealer of sugar shall hold any stock for a period exceeding thirty days from the date of receipt by him of such stock and shall not keep sugar in stock at any time in excess of the quantities mentioned against each:-

Kolkata and extended area: Dealer who bring sugar from outside West Bengal: 10000 Qtls; and in other places – 5000 Qtls.

Further the period of stock holding and turnover limits on dealers of sugar has been extended from time to time up to 31.12.2017. However, keeping in view the improvement in production and availability of sugar in the sugar season 2017-18, the stock holding limit and turnover limits has been withdrawn with effect from 19.12.2017.


In order to remove regional imbalances in demand and supply and to ensure availability of sugar at reasonable price, duty free import of 5 lakh MT of raw sugar under Tariff Rate Quota (TRQ) was allowed through ports of different zones including 3 lakh MT from South Zone ports. Further, with a view to supplement the availability of sugar mainly in Southern India including Tamil Nadu and to stabilize sugar prices, Government allowed an additional import of 3 lakh MT of raw sugar by sugar mills/ refineries under TRQ, at 25% import duty, exclusively through southern ports of the Country. The Import was open to millers/refiners who have their own capacity to convert raw sugar into refined/white. The scheme was operated by DGFT.


In order to keep the prices stable at reasonable level thereby enabling the sugar mills to support FRP payment of farmers the stock holding limits has been imposed on sugar mills for the months of February 2018 and March 2018 vide order dated 08.02.2018 as per the following:

" No producer of sugar shall hold sugar stocks less than the quantity at the end of the month mentioned below:

February, 2018: Not less than 83% of the closing stock as on the last date of January, 2018 + the sugar produced during the month of February, 2018 – sugar exported during the month of February, 2018.

March, 2018: Not less than 86% of the closing stock as on the last date of February, 2018 + the sugar produced during the month of March, 2018 – sugar exported during the month of March, 2018.”


In order to prevent any unnecessary import of sugar and to stabilize the domestic price at a reasonable level, the Central Government has increased custom duty on import of sugar from 50% to 100% in the interest of farmers w.e.f. 06.02.2018.


Custom duty @ 20 was imposed on export of sugar vide Department of Revenue’s notification no 37/2016 dated 16,06.2016. Keeping in view of production of sugar, stock position and market price sentiments, the Government of India has withdrawn the custom duty on export of sugar vide notification no. 30/2018 dated 20.03.2016.


In view of the inventory levels with the sugar industry and to facilitate achievement of financial liquidity, mill-wise Minimum Indicative Export Quotas (MIEQ) have been fixed for sugar season 2017-18 vide this department’s letter dated 28.03.2018. Export Quotas of 20 Lakh tonnes of all grades of sugar; viz raw, plantation white as well as refined, have been prorated amongst sugar factories by taking into account their average production of sugar achieved by the sugar mills during last two operational sugar seasons and the current season (up to February,2018).


Further, to evacuate some surplus sugar stocks over estimated domestic consumption through exports for keeping the market sentiments buoyant, Government has also devised Duty Free Import Authorization (DFIA) Scheme in respect of sugar vide DGFT's notification dated 2803.2018


Implementation of Recommendations of Dr. Rangarajan Committee


Gist of Recommendations


Cane Area Reservation

Over a period of time, states should encourage development of such market-based long-term contractual arrangements, and phase out cane reservation area and bonding. In the interim, the current system may continue.

States have been requested to consider the recommendations for implementation as deemed fit. So far, none of the States have taken action, current system continues. There is no reservation of area in Maharashtra

Minimum Distance Criteria

It is not in the interest of development of sugarcane farmers or the sugar sector, and may be dispensed with as and when a state does away with cane reservation area and bonding.

States have been requested to consider the recommendations for implementation as deemed fit. So far, none of the States have taken action, current system continues.

Sugarcane Price :Revenue Sharing

Based on an analysis of the data available for the by-products (molasses and bagasse / cogeneration), the revenue-sharing ratio has been estimated to amount to roughly 75 per cent of the ex-mill sugar price alone.

States have been requested to consider the recommendations for implementation as deemed fit. So far only Karnataka & Maharashtra have passed state Acts to implement this recommendation.

Levy Sugar

Levy sugar may be dispensed with. The states which want to provide sugar under PDS may henceforth procure it from the market directly according to their requirement and may also fix the issue price. However, since currently there is an implicit cross-subsidy on account of the levy, some level of Central support to help states meet the cost to be incurred on this account may be provided for a transitory period.

Central Government has abolished levy on sugar produce after 1st October, 2012. Procurement for PDS operation is being made from the open market by the states/UTs and Government is providing a fixed subsidy @ Rs. 18.50 per kg for restricted coverage to AAY families only who will be provided 1 kg of sugar per family per month.

Regulated Release Mechanism

This mechanism is not serving any useful purpose, and may be dispensed with.

Release mechanism has been dispensed with.

Trade Policy

As per the committee, trade policies on sugar should be stable. Appropriate tariff instruments like a moderate export duty not exceeding 5 per cent ordinarily, as opposed to quantitative restrictions, should be used to meet domestic requirements of sugar in an economically efficient manner.

Import and export of sugar is free without quantitative restrictions, but subject to prevailing rate of custom duty. Import duty has been enhanced from 25% to 40% w.e.f. 29.4.2015; and 50% w.e.f. 10.07.2017 which has further now been enhanced to 100% w.e.f. 06.02.2018.

Custom duty @ 20% has been imposed on export of sugar vide Department of Revenue’s notification no. 37/2016 dated 16.06.2016.

Keeping in view of production of sugar, stock position and market price sentiments, the Government of India has withdrawn the custom duty on export of sugar vide notification no. 30/2018 dated 20.03.2018.


There should be no quantitative or movement restrictions on by products like molasses and ethanol. The prices of the by-products should be market-determined with no earmarked end-use allocations. There should be no regulatory hurdles preventing sugar mills from selling their surplus power to any consumer.

Excise duty on potable alcohol/ liquor is a major source of revenue for the State Govts. Restriction on movement of ethanol and levying of taxes and duties on it by State Governments continue to be an impediment in successful implementation of EBP. The Department of Industrial Policy and promotion has now amended the I (D&R) Act, 1951 vide notification No. 27 of 2016 dated 14.5.2016. With this amendment, the States can legislate, control and/or levy taxes and duties on liquor meant for human consumption only. Other than that i.e. de-natured ethanol, which is not meant for human consumption, will be controlled by the Central Government only. With the amendment of I(D&R) Act, 1951 not only the movement of fuel grade ethanol will become smoother but the industry will be encouraged to produce more ethanol thereby increasing the blending percentage with petrol further.

Compulsory Jute Packing

May be dispensed with.

The compulsory packaging of sugar in jute bags has been relaxed further. And only 20% of the production is to be mandatorily packed in jute bags.

Back to Top