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GENERAL POLICY 

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) 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 2018-19 sugar season has been fixed at Rs. 275 per qtl. linked to a basic recovery of 10% subject to a premium of Rs. 2.75/qtl for each 0.1% increase of recovery over and above 10% and reduction in FRP at the same rate for each 0.1% decrease in the recovery rate till 9.5%. With a view to protect interest of farmers the Government has decided that there shall not be any deduction in case where recovery is below 9.5%; such farmers will get Rs. 261.25 per quintal for sugarcane in the current season.

The FRP of sugarcane payable by sugar factories for each sugar season from 2009-10 to 2018-19 is tabulated below:-


Sugar Season

FRP

(Rs. per quintal)

Basic Recovery Level

2009-10

129.84

9.5%

2010-11

139.12

9.5%

2011-12

145.00

9.5%

2012-13

170.00

9.5%

2013-14

210.00

9.5%

2014-15

220.00

9.5%

2015-16

230.00

9.5%

2016-17

230.00

9.5%

2017-18

255.00

9.5%

2018-19

275.00

10%

SUGAR PRICING POLICY

Price of sugar are market driven & depends on demand & supply of sugar. However, with a view to protect the interests of farmers, concept of Minimum Selling Price (MSP) of sugar has been introduced w.e.f. 07.06.2018 so that industry may get atleast the minimum cost of production of sugar, so as to enable them to clear cane price dues of farmers.

In exercise of the powers conferred by clause (c) of sub section (2) of section 3 of the Essential Commodities Act, 1955, Government has notified Sugar Price (Control) Order, 2018. Under the provisions of said order, Government has fixed Minimum Selling Price (MSP) of white/refined sugar at Rs. 29/kg w.e.f. 07.06.2018 for sale by sugar mills at the factory gate for domestic consumption.MSP of sugar has been fixed taking into account the components of Fair & Remunerative Price (FRP) of sugarcane and minimum conversion cost of the most efficient mills. Government has revised the MSP of white/refined sugar from Rs.29/kg to Rs.31/kg w.e.f. 14.02.2018.

ETHANOL BLENDED PETROL PROGRAMME (EBP PROGRAMME)

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 ofprocurement 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 ltrs, whereas in 2014-15, under the modified EBP supplies increased to 67 crore ltrs. In the ethanol season 2015-16, the ethanol supply has been historically high and has reached 111 crore ltrs achieving 4.2% of blending. In the ethanol season 2016-17, out of 80 crore ltrs contracted, about 66.51 crore ltrs has been supplied.

Further, in the ethanol season 2017-18, agreement were signed for supply of 164 cr litres, out of which about 150.5 cr ltrs have been supplied.In the current ethanol season 2018-19 (December-November), out of 237.62 crore ltrs contracted about 94 crore ltrs have been supplied till 02.05.2019.

FIXATION OF REMUNERATIVE PRICE OF ETHANOL FOR ETHANOL SEASON 2018-19 (December to November)

With a view to support sugar sector and in the interest of sugarcane farmers, the Government has fixed the remunerative ex-mill price of ethanol derived from C-heavy molasses @ Rs. 43.46/litre for ethanol season 2018-19 (Dec to Nov). For the first time the Government has also fixed ex-mill price of ethanol derived from B-heavy molasses at Rs.52.43/litre; and from 100% sugarcane juice at Rs.59.13 per litre for those mills who will divert 100% sugarcane juice for production of ethanol thereby not producing any sugar. This will improve the liquidity of sugar mills thereby enabling them to clear cane price arrears of farmers.

STEPS TAKEN FOR AUGMENTATION OF ETHANOL PRODUCTION CAPACITY FOR INCREASING SUPPLY OF ETHANOL UNDER ETHANOL BLENDING PETROL PROGRAMME

(i) SCHEME FOR EXTENDING FINANCIAL ASSISTANCE TO SUGAR MILLS FOR ENHANCEMENT AND AUGMENTATION OF ETHANOL PRODUCTION CAPACITY

In order to augment ethanol production capacity and thereby also allow diversion of sugar for production of ethanol, in principal approval has been granted for extension of soft loan of Rs. 6139 crores through banks to the mills for setting up new distilleries/ expansion of existing distilleries and installation of incineration boilers or installation of any method as approved by Central Pollution Control Board for Zero Liquid Discharge for which Government will bear interest subvention of Rs. 1332 crore. About 114 sugar mills are likely to be benefitted as a result of this measure and ethanol production capacity of sugar mills in the country is likely to be enhanced by about 200 crore litres per annum in the coming 3 years.

(ii) NEW SCHEME FOR EXTENDING FINANCIAL ASSISTANCE TO SUGAR MILLS FOR ENHANCEMENT AND AUGMENTATION OF ETHANOL PRODUCTION CAPACITY

The Government has notified a new scheme on 08.03.2019 for extending financial assistance to sugar mills for enhancement and augmentation of ethanol production capacity. Under the scheme Government would bear Rs.2790 crore towards interest subvention for extending indicative loan amount of Rs.12900 crore by banks to the sugar mills for augmentation of ethanol producing capacity.

(iii) SCHEME FOR EXTENDING FINANCIAL ASSISTANCE TO MOLASSES BASED STAND-ALONE DISTILLERIES

The Government has notified a scheme on 08.03.2019 for extending financial assistance to molasses based stand-alone distilleries. Under the scheme, Government would bear Rs.565 crore towards interest subvention for extending indicative loan amount of Rs.2600 crore by banks to the molasses based standalone distilleries to augment their ethanol production capacity.

EXPORT-IMPORT POLICY

(i) EXPORT OF SUGAR:

Sugar is an essential commodity. Its sales, delivery from mills, and distribution were regulated by the Government under Essential Commodities Act, 1955. Till 15.01.1997, the exports of sugar were being carried out under the provisions of the Sugar Export Promotion Act, 1958, through the notified export agencies, viz. Indian Sugar & General Industry Export Import Corporation Ltd. (ISGIEIC) and State Trading Corporation of India Ltd. (STC).

Through an Ordinance, the Sugar Export Promotion Act, 1958, was repealed w.e.f. 15.01.1997 and thus the export of sugar was decanalised.Under decanalised regime, the export of sugar was being carried out through the Agricultural and Processed Food Products Export Development Authority (APEDA), under Ministry of Commerce & Industry. Thereafter, the sugar export was undertaken by the various sugar mills/merchant exporters, after obtaining the export released orders from the Directorate of Sugar.

During the surplus phase of 2006-07 and 2007-08 sugar seasons, the sugar exports were permitted without release orders vide notification dated 31.07.2007.Subsequently, the necessity of obtaining release order was reintroduced from 01.01.2009, in view of drop in sugar production. However, due to surplus production during 2010-11 sugar season, Government permitted exports under OGL on the strength of the release order.

The phase of surplus production continued and the Government vide Notification No.1059(E) dated 11.05.2012 has again dispensed with the requirement of export release orders. Thereafter, the export of sugar was allowed free subject to prior registration of quantity with DGFT. Subsequently, w.e.f. 07.09.2015, the requirement for prior registration (RC) was dispensed.

Further, 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 thecustom duty on export of sugar vide notification no. 30/2018 dated 20.03.2018 which is still in vogue.

(ii) IMPORT OF SUGR

Import of sugar, which was placed under Open General License (OGL) with zero duty in March, 1994, continued with zero duty in March, 1994, continued with zero duty upto 27.04.1999.The Government imposed a basic customs duty of 5% and a countervailing duty of Rs.850.00 per tonne on imported sugar w.e.f. 28.04.1998. The basic custom duty was increased from 5% to 20% w.e.f.14.04.1999 in addition to the countervailing duty.In the Union Budget for the year 1999-2000, duty on imported sugar was further increased from 20% to 25% with surcharge of 10%.The customs duty on imports of sugar was again increased to 40% on 30.12.1999 and 60% on 09.02.2000 along with continuance of countervailing duty of Rs. 950/- per ton (w.e.f. 01.03.2008) plus 3% education cess.

Sugar production in the sugar season 2008-09 had declined and in order to augment the domestic stock of sugar, the Central Government allowed import of raw sugar at zero duty under Open General License (OGL) w.e.f. 17.04.2009 which was applicable till 30.06.2012. Thereafter, a moderate duty of 10% was re-imposed w.e.f. 13.07.2012 which was subsequently increased to 15% w.e.f. 08.07.2013.

Due to surplus stocks of sugar in the country and in order to check any possible imports, the Government increased the import duty from 15% to 25% on 21.08.2014, which was subsequently increased to 40% w.e.f. 30.04.2015 and further increased to 50% w.e.f. 10.07.2017. 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.

REVIEW OF EXISTING SYSTEM FOR DISTRIBUTION OF SUGARTHROUGH PDS TO ANTYODAYA ANNA YOJANA (AAY) FAMILIES:

Sugar was being distributed through the Targeted Public Distribution System (TPDS) by the States/UTs at subsidized prices for which the Central Government was reimbursing them @ 18.50 per kg. 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 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, it has been 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, providing 1 kg of sugar per AAY 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.

16 States/UTs are participating in the revised scheme and 5 more states are likely to participate in the current financial year.

DE-REGULATION OF SUGAR SECTOR ON THE RECOMMENDATIONS OF DR. C. RANGARAJAN COMMITTEE REPORT

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 is as under:

Implementation of Recommendations of Dr. Rangarajan Committee

Issues

Gist of Recommendations

Status

Cane Area Reservation:

Over a period of time, states should encourage development of such market-based long-term contractual arrangements, and phase out canereservation 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 reservationof 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, currentsystem 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 theex-mill sugar price alone.

States have been requested to consider the recommendations for implementation as deemed fit. So far only KarnatakaMaharashtra & Tamil Nadu havepassed 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. 10.07.2017which has further now been enhanced to 100% w.e.f. 6.2.2018.

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.

By-products

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 hurdlespreventing 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.