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 2022-23 sugar season has been fixed at Rs. 305 per quintal linked to a basic recovery of 10.25% subject to a premium of Rs. 3.05 per quintal for each 0.1% increase of recovery over and above 10.25% 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. 282.125 per quintal for sugarcane in the current season.

 

The FRP of sugarcane payable by sugar factories for each sugar season from 2009-10 to 2022-23 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%
2019-20	275.00	10%
2020-21	285.00	10%
2021-22	290.00	10%
2022-23	305.00	10.25%

 

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 initially 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, which has been revised from Rs.29/kg to Rs.31/kg w.e.f. 14.02.2019.  MSP of sugar has been fixed after taking into account the Fair & Remunerative Price (FRP) of sugarcane and minimum conversion cost of the most efficient mills.

 

 ETHANOL BLENDED PETROL PROGRAMME (EBP PROGRAMME)

           

The Ethanol Blended Petrol (EBP) programme was launched in year 2003 with the vision to boost agricultural economy, to reduce dependence on imported fossil fuel, to save foreign exchange on account of crude oil import bill, to reduce the air pollution and to support sugar sector and in the interest of sugarcane farmers.

                     

Keeping in view the various benefits of Ethanol Blending Programme, Government has advanced the target of achieving 20% blending to 2025, which was earlier scheduled to be achieved in 2030. However, the ethanol production capacity in the country is not sufficient at present to achieve 20% blending by 2025. Accordingly, to meet the target of 20% blending by 2025, Government has been implementing various Ethanol Interest Subvention Schemes since 2018 (in 2021 ethanol production from grain was also included under these schemes) to encourage sugar mills and distilleries to set up new distilleries (molasses based, grain-based and dual-feed based) or expansion of existing distilleries (molasses based, grain-based and dual-feed based). Under all the ethanol interest subvention schemes, Government would bear interest subvention for five years including one year moratorium against the loan availed by project proponents from banks/financial institutions @ 6% per annum or 50% of the rate of interest charged by banks/financial institutions, whichever is lower.  It is expected that this will bring an investment of about Rs. 41,000 crore in coming years. 

 

FIXATION OF REMUNERATIVE PRICE OF ETHANOL FOR ETHANOL SEASON 2022-23 (December to October) 

            With a view to support sugar sector and in the interest of sugarcane farmers, the Government has also allowed production of ethanol from B-Heavy Molasses, sugarcane juice, sugar syrup and sugar. Government is also encouraging distilleries to produce ethanol from food grains such as Damaged Food Grains (DFG), maize & surplus rice available with FCI.

 

Government has been fixing remunerative ex-mill price of ethanol derived from C-heavy & B-heavy molasses, and sugarcane juice/ sugar/ sugar syrup. The prices of ethanol produced from food grains such as Damaged Food Grains (DFG), maize & FCI rice are decided by Oil Marketing Companies (OMCs). The prices of ethanol from various feed-stocks current ESY 2022-23 (Dec-Oct) are as under: (in Rs. per ltr.)

Feed stock	ESY 2022-23(Dec-Oct)
Sugarcane juice/sugar/sugar syrup	65.61
B- Hy molasses	60.73
C-Hy molasses	49.41
Damaged Food Grains (DFG)	55.54
Rice from FCI	58.50
Maize	56.35

 

 

 

 

 

 

 

 

 

Additionally, GST as per actuals & Transportation will also be payable.

  

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

 

1. 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 principle 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.  

 

2. SCHEME FOR EXTENDING FINANCIAL ASSISTANCE TO SUGAR MILLS FOR ENHANCEMENT AND AUGMENTATION OF ETHANOL PRODUCTION CAPACITY

 

The Government has notified a 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.

 

3. 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.

  

iv.                     SCHEME FOR EXTENDING FINANCIAL ASSISTANCE TO PROJECT PROPONENTS FOR ENHANCEMENT OF THEIR ETHANOL DISTILLATION CAPACITY OR TO SET UP DISTILLERIES FOR PRODUCING 1^STGENERATION (1G) ETHANOL FROM FEED STOCKS SUCH AS CEREALS (RICE, WHEAT, BARLEY, CORN & SORGHUM), SUGARCANE, SUGAR BEET ETC.

To meet out the requirement of ethanol, Government has modified earlier scheme & notified a Scheme for extending financial assistance to project proponents for enhancement of their ethanol distillation capacity or to set up distilleries for producing 1st Generation (1G) ethanol from feed stocks such as cereals (rice, wheat, barley, corn & sorghum), sugarcane, sugar beet etc vide notification dated 14.01.2021. Under the scheme , Government would bear interest subvention for five years including one year moratorium against the loan availed by project proponents from banks @ 6% per annum or 50% of the rate of interest charged by banks whichever is lower for setting up of new distilleries or expansion of existing distilleries or converting molasses based distilleries to dual feedstock. This will bring an investment of about Rs. 41,000 crore. Due to upcoming investment in capacity addition / new distilleries, various new employment opportunities will be created in rural areas.

 

The Government has also opened a window w.e.f. 22.4.2022 for  a period of one year for inviting fresh applications from those project proponents who have acquired land for ethanol project and obtained Environmental Clearance (EC) under the "Scheme for extending financial assistance to project proponents for enhancement of their existing ethanol distillation capacity or to set up new distillery for producing 1st Generation (1G) ethanol From Feed Stocks Such As Cereals (Rice, Wheat, Barley, Corn & Sorghum), Sugarcane, Sugar Beet Etc.”

 

EXPORT-IMPORT POLICY

 

1. EXPORT OF SUGAR:

 

 Sugar is an essential commodity. Its sale, 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 decentralised. Under the decentralised 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 release 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. 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 Open General License on the strength of the release order.

   

       The phase of surplus production continued and the Government has again dispensed with the requirement of export release orders w.e.f. 11.05.2012. Thereafter, the export of sugar was made free subject to prior registration of quantity with DGFT. Subsequently, w.e.f. 07.09.2015, the requirement for prior registration (RC) was also dispensed with.

   

             Further, custom duty @ 20% was imposed on export of sugar w.e.f. 16.06.2016. However, keeping in view the production of sugar, stock position and market price sentiments, the Government of India has withdrawn the custom duty on export of sugar w.e.f. 20.03.2018.

 

       In order to prevent uncontrolled export of sugar & with a view to ensure sufficient availability of sugar for domestic consumption at a reasonable price, Directorate General of Foreign Trade (DGFT), Ministry of Commerce has also amended export policy in respect of sugar and covered it under restricted category w.e.f. June, 22 for 2021-22 sugar season. Government has also decided to allow export of sugar upto a reasonable limit w.e.f. 01.11.2022 till 31.10.2023 for the current sugar season. After the restriction of Export, domestic price of sugar are at reasonable level. Export quota of 60 LMT has been allocated to sugar mills for sugar season 2022-23.

 

 

2.  IMPORT OF SUGAR

 

 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 SUGAR THROUGH 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. 

Presently 25 States/UTs are participating in the scheme.

 

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