Sugar Industry in India

The main features of sugar industry and growing of sugarcane in India are

delineated below:

• Sugar industry is second largest agro based industry in the country and provides livelihood to about 50 million sugarcane farmers.Also, the industry gives direct employment to more than 5, 00,000 workers.Further, sugar mills being situated in rural areas contribute to development of the rural India. Many mills have set up schools, technical institutes and dispensaries etc. in rural areas.
• India is the second largest producer of sugar after Brazil and largest consumer of sugar in the world.
• Government abolished the requirement of obtaining license in 1998 for setting up a sugar mill. This has led to phenomenal growth in the sector.
• Under the policy of partial decontrol, which remained in force from the year 1966-67, except for two brief spells in the seventies, every mill was required to surrender a certain percentage of its production as levy sugar to the Government for distribution in the Public Distribution System (PDS) at a uniform retail issue price throughout the country. The levy price was often below the cost of production of sugar. The non-levy portion was subjected to monthly regulated release mechanism under which the Government specified a fixed monthly sale quota for every mill every month. The levy obligation, which was as high as high as 60% in 1967-68, was gradually reduced in a phased manner to 10 percent in 2001-02. However, based on the recommendations of an Expert Committee headed by Dr. C. Rangarajan, the then Chairperson, Economic Advisory Council to the Prime Minister (Report on the Regulation of Sugar Sector in India: The Way Forward), the Government has abolished the levy obligation on mills and dispensed with the regulated release mechanism with effect from 1 st October, 2012.
• The Central Government fixes the Fair and Remunerative Price (FRP) to be paid by mills to the sugarcane farmers having regards to the following factors as enumerated in Clause 3 of the Sugarcane (Control) Order, 1966:

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; and

g. Reasonable margins for the growers of sugarcane on account of risk and profits.

•  The FRP is fixed based on the recommendations of the Commission for Agricultural costs and Prices (CACP), an expert body tasked with recommending agricultural pricing policy to the Government of India.However, some State Governments viz., Punjab, Haryana, UP, Uttrakhand and Tamil Nadu fixes the State Advised Price (SAP) which is invariably higher than the FRP fixed by the Central Government. The Rangarajan Committee had recommended a sharing formula under which the farmers would get 75 percent of the ex-mill sale price of sugar and millers retain the remaining 25%. The State Governments of Maharashtra and Karnataka have adopted this formula.
•  Whereas license is not required for setting- up a sugar mill, it is stipulated that the proposed location should be such that there is no other existing or under-construction sugar mill within a radial distance of 15 km. Some State Governments, viz. Punjab, Haryana and Maharashtra have stipulated a higher distance norm of 25 Km.
•  Under the Sugarcane (Control) Order, 1966, the Central Government has been authorized to fix cane area reservation for each sugar mill. Under this policy, the farmers are required to sell cane to the designated mill only and the concerned mill is under obligation to procure sugarcane from its farmers at SAP /FRP in the reserved area. The Central Government has delegated its powers to the State Governments.
•  Restrictions have since been removed form import and export of sugar which is now totally free subject to payment of import / export duty. At present, the import duty is 40% and export duty is 20%. The duty on import or export of sugar has been reduced or removed depending upon the domestic availability of sugar.
•  Under the Sugar Cess Act, 1982, a cess is collected as duty of excise on all sugar produced and sold by any sugar factory in India. Presently, the rate of cess is Rs. 124 per quintal w.e.f. 01.02.2016. The money so collected by the Central Government is credited to the Sugar Development Fund (SDF) set up under the provisions of the Sugar Development Fund Act, 1982. The Fund can be utilized by the Government of India for the making loans to sugar mills for facilitating the modernization and rehabilitation, undertaking of any scheme for development of sugarcane in the area, implementation of a project of bagasse-based co-generation of power production of anhydrous alcohol or ethanol, conversion of existing ethanol plant into zero liquid discharge plant and making grants for the purpose of carrying out any research project aimed at the promotion and development of any aspect of sugar industry. The fund can also be used for defraying expenditure on internal transport and freight charges on export shipment of sugar,building up and maintenance of buffer stock with a view to stabilizing price of sugar, defraying expenditure towards interest on loans given in terms of any scheme approved by the Central Government, marketing and promotion service for raw sugar production, Interest subvention on scheme for extending soft loan to sugar mills and for any other expenditure for the purpose of the Act.
• The SDF is an important source of funding to sugar industry for providing loans at concessional rate of interest to modernize and expand their capacities and utilize the by-products bagasse and molasses for value addition and improving their viability.
•  A comparison between Brazil, the largest producer of sugar and India, the second largest producer in the world is given below:

Sugarcane and sugar production / consumption in India and Brazil