CACP Report

Price Policy for
Sugarcane
THE MARKETING SEASON
2017-18 SUGAR SEASON 2017-18
Commission for Agricultural Costs and Prices

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Department of Agriculture, Cooperation and Farmers Welfare
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Ministry of Agriculture and Farmers Welfare
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Government of India
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New Delhi
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August, 2016
Vijay Paul Sharma Commission for Agricultural Costs and Prices
Chairman Department of Agriculture, Cooperation
Tel: 011-23385216 and Farmers Welfare

Fax: 011-23383848 Ministry of Agriculture and Farmers Welfare
Krishi Bhawan, New Delhi 110 001
Preface and Acknowledgements

It is my great honour and privilege to present the report of “Price Policy for Sugarcane:
The 2017-18 Sugar Season”. The report contains Fair and Remunerative Price (FRP) and
non-price recommendations for sugarcane. While making price policy recommendations,
the Commission has taken into account various factors such as cost of production, overall
demand-supply situation, domestic and international prices, inter-crop price parity, terms
of trade, prices of primary by-products, and likely impact of FRP on general price level
and resource use efficiency. I hope these recommendations will serve the interests of
all stakeholders including sugarcane farmers, sugar mills, and consumers, and incentivise
farmers to adopt new technologies to promote competitiveness of the Indian cane and
sugar sector.
Preparation of this report required the concerted efforts of a number of individuals
and institutions. First and foremost, I would like to express my sincere thanks to
sugarcane growers, senior officers from Central and State Governments, sugar industry
representatives, scientists from sugarcane research institutes and other stakeholders for
providing valuable insights and information during the meetings and preparation of this
report. Special thanks to the Directorate of Economics and Statistics, Ministry of Agriculture
& Farmers Welfare for providing key data on cost estimates for sugarcane production.
Last but not least, credit is due to the members, officers and staff of the Commission,
who contributed to this report. Sincere thanks to Dr. Suresh Pal, Member (Official) and
Mr. K. Pradhan, Ex-Member (Non-official) for their valuable contribution and support in
preparation of this report. However, special thanks should go to Dr. Shailja Sharma, Member
Secretary, who not only contributed greatly to the report but managed timely completion
of the report. Finally, sincere thanks to Mr. S. R. Joshi (Adviser), Mr. S. N. Tobria (Adviser),
Mr. R.K. Sharma, Ms. Mamta, Dr. Harish Kumar Kallega, Mr. Manish Bindal, and Mr. Sube
Singh for their contribution and support during all stages of the report’s preparation.
16th August 2016 (Vijay Paul Sharma)
2017-18 SUGAR SEASON iii

Contents
S. No. Description Page No.
Acronyms xi
Summary of Recommendations xiv
Price Policy Recommendations xiv
Non-Price Recommendations xvi
Contents
1. Overview 1
Domestic Production 1
Sugarcane Pricing 3
Production Subsidy 4
Monitoring of Ex-Mill Prices 4
Key Issues Confronting Sugarcane Sector 5
Promoting Efficiency in Sugarcane and Sugar Production 5
Sucrose Content and Recovery Rate of Sugarcane 5
Mechanization of Sugarcane Cultivation and Harvesting Operations 6
Sugarcane: A Water Intensive Crop 6
Transparency in Weighing of Sugarcane 7
Development of Sugar Sector as Energy Hub 7
Trade 8
Structure of the Report 9
2017-18 SUGAR SEASON v

2. Demand Supply and Price Policy 10

Domestic Market Scenario 10
State Advised Price (SAP): A Source of Distortion 11
Cane Price Arrears 12
Revenue Sharing Formula (RSF) 15
Sugar Development Fund (SDF) 16
De-reservation of Sugarcane Area and Removal of Minimum Distance 17
Criterion
Way Forward 18
3. Productivity of Sugarcane 19
Decadal Productivity Growth 19
Annual Productivity Growth 20
Sugarcane Production and Productivity in the Major Producing States 21
Contents
District Level Productivity of Sugarcane 22

Productivity in India vis-à-vis Major Producing Countries 23
Capacity Utilization of Sugar Mills in India 23
Recapitulation 25
4. Trade Competitiveness of Indian Sugar 26
Global Scenario: Production and Trade in Sugar 26
India’s Trade in Sugar 28
Trade Policy 29
Global Outlook 31
5. Costs, Returns and Inter-Crop Price Parity 33
Costs and Returns of Sugarcane during 2012-13 to 2014-15 33
Labour and Input Price Movement 35
Cost Projections, Sugar Season 2017-18 38
Inter Crop Price Parity 39
Recapitulation 40
vi 2017-18 SUGAR SEASON

6. Considerations and Recommendations for Price Policy 41
State Advised Price (SAP) and Cane Price Arrears 42
Sugarcane Pricing: Adoption of Hybrid Formula 42
Monitoring of Ex-Mill Prices 43
Sugar Development Fund (SDF) 43
De-reservation of Sugarcane Area and Removal of Minimum Distance 43

Criterion
Promoting Efficiency in Sugarcane and Sugar Production 44
Sucrose Content and Recovery Rate of Sugarcane 44
Mechanization of Sugarcane Cultivation and Harvesting Operations 45
Increasing Productivity and Profitability 45
Transparency in Weighing of Sugarcane 46
Contents
Improve Water Use Efficiency and Sustainability of Sugarcane 46
Production
Product Diversification for Financial Health of Sugar Mills 46
Cost of Production and FRP of Sugarcane 47
2017-18 SUGAR SEASON vii

List of Tables
Table No. Topic Page No.
Table 1.1 Number of Sugar Mills and Distillation Capacity, 2015-16 8

Table 2.1 Balance Sheet of Sugar 11
Table 2.2 Cane Price Payable to Farmers in UP as a Percentage of Value of 12

Sugar
Table 2.3 State-wise Cane Arrears, upto 2015-16 14
List of Tables
Table 3.1 Average Annual Growth Rates of Sugarcane, 1990s to 2010s 19

Table 3.2 Annual Growth Rate of Sugarcane, 2011-12 to 2015-16 20
Table 3.3 District Level Productivity of Sugarcane 22
Table 3.4 State-wise Sugar Mills, Sugar Production and Sugar Recovery, 24
2014-15
Table 4.1 Forecast of International Prices of Sugar, 2016 to 2025 32
Table 5.1 Gross and Net Returns of Sugarcane (TE2014-15) 34
Table 5.2 Projected Costs, Sugar Season 2017-18 38
Table 5.3 Sugarcane Relative Returns (Percent) 40
viii 2 0 1 7 - 1 8 S U G A R S E A S O N
List of Charts
Chart No. Topic Page No.
Chart 1.1 Production of Sugarcane, Sugar and Cane Crushed, 2001-02 to 2
2015-16
Chart 1.2 State-wise Share in Production of Sugarcane and Sugar, 3
TE2015-16
Chart 2.1 Cane Price Arrears, 2009-10 to 2015-16 13
Chart 3.1 All India Area, Production and Productivity of Sugarcane, 2006-07 20
List of Charts
to 2015-16
Chart 3.2 State-wise Production and Productivity of Sugarcane, TE2015-16 21
Chart 3.3 State-wise Productivity of Sugarcane, 2006-07 to 2015-16 21
Chart 3.4 Benchmarking Sugarcane Productivity and Efficiency Gaps 23
Chart 3.5 State-wise Installed Capacity and Capacity Utilization of Sugar 25
Mills, 2014-15
Chart 4.1 Major Producers of Sugarcane and Sugar Beet, TE2014 26
Chart 4.2 Major Producers of Sugar, TE2015-16 27
Chart 4.3 Major Exporters and Importers of Sugar, TE2015-16 27
Chart 4.4 India’s Exports and Imports of Sugar, 2004-05 to 2015-16 28
Chart 4.5 International and Domestic Wholesale Prices of Sugar, 2011 Q1 to 31
2016 Q2
Chart 5.1 Gross and Net Returns of Sugarcane (TE2014-15) 34
Chart 5.2a Annual Average Growth in Wages of Agricultural Labour (During 35
2013-14 to 2015-16 at Current Prices)
Chart 5.2b Annual Average Growth in Wages of Agricultural Labour (During 36
2013-14 to 2015-16 at Constant Prices 2015-16 = 100)
Chart 5.2c Annual Average Daily Wages of Agricultural Labour 2015-16 and 36
Growth in Wages 2015-16 over 2014-15
Chart 5.3 Movements in Prices of Farm Inputs 37
Chart 5.4 Share of Inputs in Total Cost of Production (C2), TE2014-15 37
Chart 5.5 Supply Curve and Projected Cost, Sugar Season 2017-18 39
2017-18 SUGAR SEASON ix

List of Annex Tables
Table No. Topic Page No.
Table S.1 FRP Recommended and its Linking with RR, Sugar Season 2017-18 49
Table 1.1 Sugarcane: Area, Production and Yield 50
List of Annex Tables
Table 1.2 State-wise Production of Sugar 52

Table 1.3 Average Recovery of Sugar from Sugarcane (Oct.-Sept.) 53
Table 1.4a State-wise Policy on Molasses 54
Table 1.4b State-wise Duties/ Levies Imposed on Ethanol 55
Table 2.1 Cane Price Payable to Farmers as a Percentage of Value of Sugar 56
Table 2.2 State-wise Comparison of SAP and FRP 57
Table 3.1 Benchmarking Sugarcane Productivity and Efficiency Gaps 59
Table 5.1 Month-wise and State-wise Average Wage Rates for Agricultural 60
Labour (Man)
Table 5.2 Farm Inputs- Wholesale Price Index (Base 2004-05=100) 62
Table 5.3 Sugarcane: Break-up of Cost of Cultivation 64
x 2017-18 SUGAR SEASON

Acronyms
A2 Actual Paid out Cost
A2+FL Paid out Cost plus Imputed Value of Family Labour
APEDA Agricultural and Processed Food Products Export Development Authority
C2 Comprehensive Cost including Imputed Rent and Interest on Owned Land and
Capital Respectively
CACP Commission for Agricultural Costs and Prices
Acronyms
CIF Cost, Insurance and Freight
CIAE Central Institute of Agricultural Engineering
CF Correction Factor
CoP Cost of Production
CIPI Composite Input Price Index
CPI-AL Consumer Price Index for Agricultural Labour
CS Comprehensive Scheme of Studying Cost of Cultivation of Principal Crops in
India
CSO Central Statistical Office
CV Coefficient of Variation
DAC & FW Department of Agriculture, Cooperation & Farmers Welfare
DES Directorate of Economics and Statistics
DFPD Department of Food and Public Distribution
DGCIS Directorate General of Commercial Intelligence and Statistics
DGFT Directorate General of Foreign Trade
EBP Ethanol Blending Policy
EC Act Essential Commodities Act
2017-18 SUGAR SEASON xi

FAI Fertilizer Association of India
FAO Food and Agriculture Organization
FOB Free on Board
FPS Fair Price Shop
FRP Fair and Remunerative Price
FY Financial Year
FYP Five Year Plan
GDP Gross Domestic Product
GVO Gross Value of Output
Ha Hectare
HSDO High Speed Diesel Oil
IISR Indian Institute of Sugarcane Research
ISEC Indian Sugar Exim Corporation
Acronyms
ISGIEIC Indian Sugar and General Industry Export Import Corporation Ltd.
ISMA Indian Sugar Mills Association
KLPD Kilo Litre Per Day
KVK Krishi Vigyan Kendra
LDO Light Diesel Oil
LIFFE London International Financial Futures and Options Exchange
LPA Long Period Average
MFRP Minimum Fair and Remunerative Price
MIEQ Minimum Indicative Export Quotas
Mn Million
Mo AFW Ministry of Agriculture and Farmers Welfare
Mo CA, F&PD Ministry of Consumer Affairs, Food & Public Distribution
MT Metric Tonne
NCDEX National Commodity and Derivatives Exchange
NFCSF National Federation of Cooperative Sugar Factories
NSSO National Sample Survey Office
OECD Organization for Economic Co-operation and Development
xii 2 0 1 7 - 1 8 S U G A R S E A S O N
OEA Office of Economic Adviser
OGL Open General License
OMCs Oil Marketing Companies
PRSF Prices determined by Revenue Sharing Formula
PMKSY Pradhan Mantri Krishi Sinchyee Yojana
Q1, Q2, Q3, Q4 Quarters- Calendar Year
Qtl Quintal
R&D Research and Development
RC Recovery Certificates
RCAC Registration-cum-Allocation Certificate
RIP Retail Issue Price
RR Recovery Rate
RSP Revenue Sharing Formula
Acronyms
SAP State Advised Price
SDF Sugar Development Fund
SMP Statutory Minimum Price
SPSF Sugar Price Stabilization Fund
SRR State Recovery Rate
STC State Trading Corporation of India
TCD Tonnes Crushed Per Day
TE Triennium Ending
TFP Total Factor Productivity
USDA United States Department of Agriculture
w.e.f. with effect from
WPI Wholesale Price Index
WTO World Trade Organization
2017-18 SUGAR SEASON xiii

Summary of Recommendations
Price Policy Recommendations
S.1 The Commission recommends a Fair and Remunerative Price (FRP) for sugarcane
to be Rs. 255/qtl. at 9.5 percent recovery level for 2017-18 sugar season. With
every increase in recovery by 0.1 percentage point, the FRP will increase by
Rs. 2.68/qtl. All India average recovery rate being 10.60 percent, the FRP
recommended would work out to Rs. 284.48/qtl. FRP recommended for
every 0.1 percentage point (upto 13.5) increase in recovery is given in Annex
Table S.1. The Commission projects A2+FL cost of production of sugarcane at
Rs 145/qtl. and cost C2 (inclusive of cost of transportation and insurance premium)
at Rs 227/qtl. corresponding to 9.5 percent recovery level for 2017-18 sugar
season. Given the expected deficit supply of sugar in India and the global market,
and stable growth in the consumption, sugar prices are likely to be higher in 2016-
17. However, we expect a rebound in the production in 2017-18 due to good
monsoon in 2016 and the prices are likely to remain stable.
Sugarcane Pricing and Sugar Price Stabilization Fund
S.2 The Commission recommends that for fixing cane prices, a hybrid approach, a
combination of Revenue Sharing Formula (RSF) based on revenue generated from
sugar and primary by-products and FRP, a floor price, needs to be adopted. Under
this approach, farmers’ realization from the cane would be higher when sugar and
by-product prices are high. However, during the period of downward movement of
prices of sugar and its major by-products, the cane final price to be paid to farmers
can be lower than the FRP. Since farmers need to be paid the FRP as the minimum,
the difference between FRP and the final price determined based on RSF should be
reimbursed to the farmers/mills. In order to meet the expenditure, when the actual
payment to farmers based on RSF is lower than FRP, either a separate Sugar Price
Stabilization Fund (SPSF) within the SDF could be created or Sugar Development
Fund (SDF) could be used for the purpose. This recommendation essentially has
three components namely, (i) FRP, (ii) RSF and (iii) SPSF/SDF and all these need to be
implemented as an ‘atomic whole’ for viability of sugar industry. Maharashtra has
already implemented the Revenue Sharing Formula while Karnataka has passed an
xiv 2 0 1 7 - 1 8 S U G A R S E A S O N
Act in 2013 but still not implemented. Thailand also has a similar policy intervention,
the Cane and Sugar Fund (CSF), which provides support to the growers and mills.
Based on the Rangarajan Committee Report, the Commission has recommended
hybrid approach of sugarcane pricing in its earlier Price Policy Reports.
SAP: A Source of Distortion
S.3 Some State Governments announce their own State Advised Prices (SAPs), which
are way above FRP fixed by the Centre. The main problem with this approach is that
SAP is not linked with sugar recovery and in the event of sugar prices being subdued,
as has been the case in 2014-15 and initial months of 2015-16, higher SAP leads
to accumulation of cane arrears. The situation aggravates when SAP is significantly
higher than the FRP. For example, Uttar Pradesh and Tamil Nadu, which pay SAPs,
accounted for over 70 percent of total cane arrears in 2015-16, which clearly shows
that SAP is main distorting factor resulting in huge cane arrears. In addition, SAP
does not incentivise efficiency in terms of better sugar recovery as SAP is not linked
to sugar recovery rate unlike FRP. High SAP without any linkage to sugar recovery and
sugar prices is not viable and therefore unsustainable. The Commission recommends
that the system of announcing SAPs by the States should be done away with as it has
lost its relevance and resulted in inefficient price policy.
Monitoring of Ex-Mill Sugar Prices
S.4 Ex-mill price of sugar is an important determinant of FRP and proposed RSF and
therefore, it should be regularly monitored as there is no reliable official source
for this information. Though wholesale prices are monitored by the Ministry of
Consumer Affairs, Food and Public Distribution (Mo CA, F&PD) and the Ministry
of Agriculture and Farmers Welfare (Mo A&FW) but ex-mill sugar prices are not
monitored. Since there is a significant difference between wholesale and ex-Mill
prices, the Commission recommends that Directorate of Sugar (Mo CA, F&PD) should
regularly track state-wise ex-mill prices of sugar, and three primary by-products of
cane and publish/upload on their website, at least on quarterly basis. Transparency
and reliability of monitoring ex-mill sugar prices is critical for shifting to RSF and
gain confidence of farmers, especially in the states where larger quantity of cane is
supplied to private sugar mills.
Non-Price Recommendations
Mechanization of Sugarcane Cultivation and Harvesting Operations
S.5 Given that labour availability is becoming a major constraint and farm wages are
rising, mechanization of sugarcane cultivation is becoming a dire necessity. The
Commission in its interaction with the farmers in UP and Maharashtra observed
that farmers have started mechanization of sugarcane planting operations but face
serious constraints in mechanization of sugarcane harvesting operations due to
high cost of cane harvesters as well as non-availability of appropriate harvesting
2017-18 SUGAR SEASON xv

machines that take care of harvesting, peeling and bundling of cane. The Commission
recommends that a consortium of institutions such as the ICAR-Indian Institute of
Sugarcane Research (IISR), ICAR-Central Institute of Agricultural Engineering (CIAE),
IITs, etc. takes an initiative to develop suitable sugarcane harvester. The Government
should play a facilitating role in this intervention through funding from the SDF.
Improve Water Use Efficiency
S.6 Sugarcane is a water-intensive crop, and with water becoming increasingly scarce
resource particularly due to severe droughts in the last two years, there is a need
to optimise cane productivity not only per unit of land, but also per unit of water.
Against this backdrop, the Commission recommends taking up drip irrigation
in sugarcane on a much higher priority. The allocation for micro-irrigation under
PMKSY, which was Rs. 1000 crore in 2015-16, needs to be increased substantially.
The Commission recommends that sugar mills should be encouraged to provide
additional assistance to farmers for installation of drip irrigation in sugarcane. During
meetings with farmers, it was observed that some farmers were not aware of such
schemes, therefore, wide publicity should be given to such schemes by the State
Governments and sugar mills to create awareness and promote adoption of water-
saving technologies. As intercropping of pulses, oilseeds, cereals and vegetables
with sugarcane improves profitability and soil health, special efforts are needed to
promote, and incentivize sugarcane based intercropping systems. Two issues that
will remain central to sugar sector and will help in future growth are, better and
more efficient usage of water and judicious alignment of sugarcane pricing with
revenue sharing formula.
Product Diversification for Financial Health of Sugar Mills
S.7 The sugar sector has to be conceived as an energy hub producing not only sugar
but also value-added by-products such as ethanol from molasses and power from
bagasse. In order to tap its full potential, molasses need to be fully freed from
movement restrictions or reserved allocation for potable liquor. The Government
has modified its ethanol-blending of petrol (EBP) policy under which it has fixed
remunerative prices for ethanol supplied for blending with petrol and has dismantled
the tender based price discovery procedures for ethanol. This would increase the
ex-mill price of ethanol and help improve the liquidity of the industry and enable
them to clear the cane price arrears. To maximize value-addition, the standalone
sugar mills need to create distillation capacities. Besides product diversification,
sugar mills should also undertake modernization of operations to reduce the cost
and optimize capacity utilization for economies of scale. Monetary help from SDF
and financial institutions can be availed for modernization, power co-generation
and ethanol and alcohol production. Financial viability of sugar mills is essential for
sustainability of sugarcane production and maintaining a stable price regime.
*****
xvi 2 0 1 7 - 1 8 S U G A R S E A S O N
Chapter 1
Overview
1.1 India is the second largest producer and the largest consumer of sugar in the
world. India contributes about 15 percent of world sugar production and has
annual production of about 25-28 million tonnes in recent past. Presently, about
5 million hectares of land is under sugarcane cultivation with annual production
of about 356 million tonnes and average yield of around 71 tonnes per hectare in
TE 2015-16. Sugarcane contributes about 5 percent to the total value of output
from agriculture and accounts for about 2.6 percent of gross cropped area. About 50
million sugarcane farmers and a large number of agricultural labourers are involved
in sugarcane cultivation and ancillary activities, therefore, the sector is an important
driver of rural economy. In India, there are mainly two distinct agro-climatic regions
Chapter 1
of sugarcane cultivation, namely tropical and subtropical. However, for the purpose
of varietal development, five agro-climatic zones have been identified namely,
(i) North-Western Zone (ii) North-Central Zone (iii) North-Eastern Zone (iv) Peninsular
Zone and (v) Coastal Zone.
Domestic Production
1.2 India achieved a record production of 362 million tonnes of sugarcane in 2014-
15 but declined to 352 million tonnes in 2015-16. Of this, about 64 percent was
crushed for sugar production and the remaining was used for production of jaggery,
khandsari etc. Two back-to-back droughts in major sugarcane growing areas are
likely to pull down India’s production of sugar to about 25 million tonnes (a fall of
about 3 million tonnes compared to last year) in 2016-17 sugar season (Chart 1.1).
As per fourth advance estimates, sugarcane acreage in Maharashtra is estimated to
be lower by 4.2 percent from 10.30 lakh ha in 2014-15 to 9.87 lakh ha in 2015-16
and yield is also expected to be lower by 11 percent. In Karnataka and Tamil Nadu
the sugarcane acreage has decreased by 6.25 percent and 2.28 percent respectively
whereas in Uttar Pradesh there has been a marginal increase (1.31 percent) in
sugarcane acreage. State-wise area, production and yield of sugarcane during 2006-
07 to 2015-16 is given in Annex Table 1.1.
2017-18 SUGAR SEASON 1

Chart 1.1: Production of Sugarcane, Sugar and Cane Crushed, 2001-02 to 2015-16
375 30
350
325 28
300 26
275
250 24
n tonnes
Million ttonnes
225
200 22
Million
175 20
150
125 18
100
75 16
50 14
25
0 12
2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013- 2014- 2015-
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Sugarcane 297.2 287.4 233.9 237.1 281.2 355.5 348.2 285.0 292.3 342.4 361.0 341.2 352.1 362.3 352.2
Cane Crushed 180.3 194.4 133.4 124.9 188.1 278.5 252.8 145.1 185.2 233.2 255.5 250.2 239.8 270.3 226.9
Sugar 18.5 20.1 14.0 13.7 19.0 28.2 26.3 14.7 18.8 24.3 26.3 25.2 24.6 28.5 25.1
Source: DES and Directorate of Sugar, DFPD

Overview
1.3 In India, production of sugarcane has increased from 328.3 million tonnes in
TE2007-08 to 355.5 million tonnes in TE2015-16 and more than two-third of this
growth has been driven by area expansion while yield has contributed about one-
third of the growth. The production of sugar has increased at an annual compound
growth rate of about 3.5 percent during 2005-06 to 2014-15, much higher than
growth in sugarcane production (1.82 percent), which indicates improvement in
sugar recovery.
1.4 The area under sugarcane, which increased from 49.93 lakh hectares in 2013-14
to 50.67 lakh hectares in 2014-15, declined by 2.2 percent to 49.53 lakh hectares
in 2015-16. Production and yield of sugarcane have also shown a decline of 2.8
percent and 0.6 percent, respectively, in 2015-16.
1.5 Uttar Pradesh is the largest producer of sugarcane in the country (38.7 percent
share in TE2015-16) followed by Maharashtra (21.9 percent), and Karnataka
(11.3 percent)(Figure 1.2 a). Other major producers of sugarcane are Tamil Nadu
(8.2 percent), Bihar (3.9 percent), Gujarat (3.7 percent) and Andhra Pradesh (3.3
percent). In terms of sugar, Maharashtra is the largest producer (34.5 percent)
followed by Uttar Pradesh (26.4 percent) (Figure 1.2 b). This is mainly due to
higher sugar recovery rate in Maharashtra and more diversion of sugarcane to
khandsari and gur production in Uttar Pradesh. During last one and half decade,
share of Uttar Pradesh in sugarcane production has marginally declined while
share of Maharashtra has increased from 15.6 percent to 21.9 percent during the
2 2017-18 SUGAR SEASON
same period. Karnataka has been a major gainer in the share of sugar production
(8.7 percent to 16.9 percent) primarily due to high sugar recovery. State-wise
production of sugar is given in Annex Table 1.2.
Chart 1.2a and b: State-wise Share in Production of Sugarcane and Sugar, TE2015-16
a: Sugarcane b: Sugar
Others Others
Guj Guj
9.0% 7.5%
3.7% Bih 4.4%
Bih UP 2.1% UP
3.9% 38.7% AP 26.4%
3.5%
AP
3.3% TN
4.7%
TN
8.2%
Kar
11.3% Kar
16.9%
Maha Maha
21.9% 34.5%
Overview
Source: DES and Directorate of Sugar, DFPD
Sugarcane Pricing
1.6 Unlike other mandated commodities, the pricing of sugarcane is governed by the
statutory provisions of the Sugarcane (Control) Order, 1966 issued under the EC
Act, 1955. Prior to 2009-10 sugar season, the Central Government was fixing the
Statutory Minimum Price (SMP) of sugarcane and farmers were also entitled to
share profits of a sugar mill on 50:50 basis. The sharing provision was introduced
in the Control Order as Clause 5A in September, 1974 with a well-intended purport
to empower farmers to equally share the dividends of the mills. But it remained
virtually unimplemented mainly on account of delays in the announcement of profits
by the mills. The Sugarcane (Control) Order, 1966 was amended w.e.f. 22.10.2009
and the concept of SMP was replaced by the Fair and Remunerative Price (FRP) of
sugarcane. However, some state governments such as Haryana, Punjab, Tamil Nadu,
Uttarakhand and Uttar Pradesh announce the State Advised Prices (SAP), which are
generally higher than the FRP.
1.7 The Commission in its earlier reports had recommended to adopt a hybrid approach,
a combination of Revenue Sharing Formula (RSF) based on revenue generated from
sugar and primary by-products, namely, bagasse, molasses and pressmud and FRP,
a floor price, while fixing cane prices as suggested by the Rangarajan Committee on

the Regulation of Sugar Sector in India. Under this approach, farmers’ realization
from cane would be higher when sugar and by-product prices are high. However,
during the period of downward movement of prices of sugar and its major by-
products, the cane final price to be paid to farmers would be lower than the FRP.
Since farmers would due to receive an initial payment for sugarcane based on FRP
(a minimum guaranteed price). The difference between FRP and the price determined
based on RSF should be reimbursed to the mills. In case, sugar mills have not paid
FRP to farmers, payments can be transferred directly to farmer’s bank account. In
order to meet the expenditure, when the actual payment to farmers based on RSF is
lower than FRP, either a separate Sugar Price Stabilization Fund (SPSF) within the SDF
could be created or Sugar Development Fund (SDF) could be used for the purpose.
This recommendation essentially has three components namely (i) FRP, (ii) RSF and
(iii) SPSF/SDF and all these need to be implemented as an ‘atomic whole’ for the
viability of the sugar industry. Maharashtra has already implemented the Revenue
Sharing Formula. Thailand has also a similar policy intervention, the Cane and Sugar
Fund (CSF), which provides support to the growers and mills.
Production Subsidy
Overview
1.8 The Central Government in December 2015 had announced a Scheme to provide
production subsidy of Rs. 4.50 per quintal of cane crushed by mills to be paid directly
to cane growers to help mills due to low retail sugar prices to clear cane arrears. The
production subsidy was to be used for payment of cane price dues of the current
sugar season 2015-16 relating to the Fair and Remunerative Price (FRP) of sugarcane
fixed by the Central Government for that sugar season and cane price arrears of
previous sugar seasons. Subsequent balance, if any, shall be credited into the mill’s
account. Priority was given to settling cane arrears due of the previous years. The
expenditure on production subsidy was met from Sugar Development Fund (SDF).
The subsidy was subject to a condition to export certain quota of sugar and supply
of ethanol to local oil marketing companies. This production subsidy was withdrawn
in May 2016 due to rise in wholesale price of sugar in the second quarter of 2016 by
42 percent over the corresponding period of last season.
Monitoring of Ex-Mill Prices

1.9 Ex-mill price of sugar is an important determinant of FRP and therefore, should be
regularly monitored as there exists no reliable official source for this information.
Though wholesale prices are monitored by the Ministry of Consumer Affairs, Food
and Public Distribution (Mo CA, F&PD) and the Ministry of Agriculture and Farmers
Welfare (Mo A&FW), there exists a significant difference between wholesale
and ex-Mill prices, the Commission recommends that Directorate of Sugar
(Mo CA, F&PD) should regularly track state-wise ex-mill prices of sugar, and three
primary by-products of cane and publish these/upload on their website, at least on
quarterly basis.
Key Issues Confronting Sugarcane Sector
1.10 Some key issues that confront sugarcane and sugar sector which need attention
are promoting efficiency in sugarcane and sugar production, sucrose content and
recovery rate of sugarcane, mechanization of sugarcane cultivation and harvesting
operations, improving water use efficiency, transparency in weighing of sugarcane,
development of sugar sector as energy hub, and fixation of sugarcane prices.
Promoting Efficiency in Sugarcane and Sugar Production
1.11 Production of sugar, inter alia, depends on recovery rate of sugarcane. In India, the
recovery rate has been hovering around 10 percent for a long time despite the fact
that the Government has extended large assistance from Sugar Development Fund
(SDF) for modernization of plant and machinery of sugar mills and also for cane
development. Recovery rate of sugar mainly depends on sucrose content in the
sugarcane, conditions of plant and machinery, cane supply arrangements in the State
and agro-climatic conditions in the region. Except the agro-climatic condition, which
is a natural factor, other factors can be influenced by taking appropriate actions to
improve the recovery rate.
Sucrose Content and Recovery Rate of Sugarcane
Overview
1.12 For improving the quality of sugarcane, the research and development (R&D)
institutions should develop sucrose-rich, less water consuming and pest and
disease resistant varieties. The existence of considerable difference in the yield
rates at demonstration plots and at farmers’ field bears a testimony to sub-optimal
level of inputs use, management practices and lack of effective extension services
provided to farmers. Further, the farmers have to be incentivized to grow sucrose
rich early-varieties by using improved varieties, which will help them to reduce
cost of production and receive higher income realization per hectare. However, it is
encouraging to observe that recovery of sugar has improved significantly in Haryana,
Punjab, Gujarat and Uttar Pradesh during last few years. During discussions with
the State officials of Uttar Pradesh, it was found that early and improved variety
of sugarcane has resulted in an increase in recovery rate to a high of 12.4 percent
in one mill, which is the highest ever achieved in northern India, which in turn
improved average recovery rate to 10.64 in the State during 2015-16. State-wise
average recovery of sugar from sugarcane since 2006-07 to 2015-16 is given in Annex
Table 1.3.
1.13 Among other factors, one of the reasons for high recovery rate in Maharashtra,
Gujarat and North Karnataka is that sugar mills themselves arrange harvesting and
transportation of cane. Thus, the mills prepare a harvesting schedule as per maturity
of cane and requirement in the mill. On the other hand, in the northern States farmers
arrange harvesting of cane on their own. Many times, the harvested cane remains in
the fields or at purchase centres for an extended period, resulting in loss of sucrose
content. If mills undertake harvesting and transportation of cane, the recovery rate
may go up by 0.5 to 1 percent. The Commission is of the considered view that the
Government may impress upon the sugar mills and the State Governments to put in
place a system, which facilitates harvesting and transportation of cane by mills.

1.14 Given the fact that there is a labour shortage and wage rates have been increasing
rapidly in the recent years, it is high time to respond to this situation by promoting
mechanization of planting and harvesting operations. The Commission in its
interaction with the farmers in UP observed that planters were being used to plant
sugarcane which has resulted in higher yields with less input cost. While interacting
with the scientists of Indian Institute of Sugarcane Research (IISR), it was found
that no comprehensive harvesting machine that takes care of harvesting, peeling
and bundling of cane has been developed at reasonable prices suitable to local
conditions as yet. The Commission recommends that a consortium of institutions
such as the ICAR-Indian Institute of Sugarcane Research (IISR), Central Institute of
Agricultural Engineering (CIAE), IITs, etc. takes an initiatives to develop suitable
sugarcane harvester. The Government should play a facilitating role in this through
Overview
the SDF.
Sugarcane: A Water Intensive Crop

1.15 Sugarcane is a water intensive crop, and with water becoming increasingly
scarce (given that Maharashtra and Karnataka experienced severe droughts in
the last two years), it is advisable that cane productivity needs to be optimized
not only per unit of land, but also per unit of water. Against this backdrop, the
Commission recommends taking up drip irrigation in sugarcane on a much
higher priority in drought prone areas of Maharashtra and Karnataka, which has
the potential to save almost 40 to 50 percent water along with raising sugarcane
productivity by 25 to 50 percent. Under “Per Drop More Crop” component of
Pradhan Mantri Krishi Sinchyee Yojana (PMKSY), 45-60 percent subsidy for small
and marginal farmers and 35-45 percent subsidy to others is provided with 40-65
percent share of beneficiary. The funding pattern between Central Government
and State Government share is fixed at 60:40 percent. The allocation for micro-
irrigation under PMKSY in 2015-16 was Rs. 1000 crore, which needs to be
increased. The Commission recommends that sugar mills should be encouraged
to provide additional assistance to farmers for installation of drip irrigation in
sugarcane. During meetings with farmers, it was observed that some farmers
were not aware of such schemes, therefore, wide publicity should be given to
such schemes by the State Governments and sugar mills to create awareness
and promote adoption of water-saving technologies.

Transparency in Weighing of Sugarcane
1.16 Lack of trust and transparency in weighing of sugarcane was raised by farmers/
farmers’ representatives during the stakeholder discussions. As recommended in
the earlier reports, the Commission reiterates that Government should persuade
the state governments/Cane Commissioners and sugar mills to make adequate
arrangements for electronic weigh bridges/machines, which measure and display
the actual weights so as to improve trust and transparency between these two
stakeholders.
Development of Sugar Sector as Energy Hub

1.17 In the long run Ethanol Blending Policy (EBP) and co-generation are the way
forward and the sugar industry needs to upgrade its technologies and create
capacities for cogeneration and ethanol production. In other words, the sector has
to be conceived as an energy hub producing not only sugar but also ethanol from
molasses and power from bagasse. In order to tap its full potential, molasses need
to be fully freed from movement restrictions or reserved allocation for potable
liquor. To encourage the sector, Government has already approved 5 percent of
ethanol blending in petrol. As ethanol is not available in all the states, the Oil
Overview
Marketing Companies (OMCs) have been permitted to sell ethanol blended petrol
with ethanol up to 10 percent in the States where it is easily available to reach all
India average of 5 percent. During the sugar year 2014-15, OMCs have achieved
a blending percentage of only 2.3 percent. The Government has therefore,
modified its EBP policy under which it has fixed remunerative prices for ethanol
supplied for blending with petrol and has dismantled the tender based price
discovery procedures for ethanol. As against a price of Rs. 32 per litre (ex-mill)
of ethanol being paid by OMCs to the sugar mills for blending in the previous
years, the price was increased to a level of Rs. 42 per litre (ex-mill). As a result,
the supply of ethanol, which was about 32 crore litres per annum, shot upto a
level of 83 crore litres per annum. Excise duty on ethanol supplied to OMCs for
EBP by sugar mills has been waived off to further incentivize ethanol supplies for
the blending programme. This would further increase the ex-mill price of ethanol
and help improve the liquidity of the industry and enable them to clear the cane
price arrears. To maximize value-addition, the standalone sugar mills need to
create distillation capacities. As per ISMA, out of 521 crushing units, only 181
have distillation capacities whereas 128 units have manufactured ethanol during
2015-16. Remaining 53 distilleries have produced only rectified spirit as these
units do not have ethanol manufacturing capacity. Number of sugar mills with
distillation capacity is given in Table 1.1. State-wise policy on molasses and State-
wise duties/levies imposed on ethanol are given in Annex Table 1.4a & b.

Table 1.1: Number of Sugar Mills and Distillation Capacity, 2015-16
Particulars Units (Number) Capacity

Sugar Mills (Operational) 521 21.36 lakh TCD
Distilleries attached to Sugar Mills 181 9600 KLPD
Distilleries Manufacturing Ethanol 128 6655 KLPD
TCD: tonnes crushed per day
KLPD: Kilo ltr. per day
Source: ISMA
1.18 In Uttar Pradesh, about 25 percent of molasses are reserved for potable liquor
and the price paid is less than one-fourth of the market price being offered by the
chemical industry. Such perverse policies need to be fully overhauled. But two
issues will remain central to sugar sector’s future growth: (a) How best one can align
sugarcane production with better and more efficient usage of water; and (b) how
judiciously we can align sugarcane pricing with revenue sharing formula. If these
issues are tackled rationally and quickly, sugar sector can significantly enhance its
Overview
worth in coming years. Else, it will remain besieged in uncertainty, wide fluctuations
and only limited growth.
1.19 In nut-shell, sugar mills should become energy complexes and produce not only
sugar but also alcohol, ethanol, power and other downstream products. Setting up
these facilities by sugar mills would make them energy hubs of the country and
enable them to pay remunerative price to cane growers even in the years of excess
production. For this purpose, the Central Government can prepare a concrete
action plan, in consultation with State Governments, concerned Departments of
Central Government and apex organizations of sugar industry, to turn sugar mills
into integrated energy complexes in a time bound manner.
Trade
1.20 India is currently the third largest exporter of sugar in the world and is an occasional
importer, depending upon the domestic demand and supply situation. The country
has been a net exporter of sugar during last six years and exports have increased
at an annual compound growth rate of about 8.6 percent. During this period,
exports reached a record level of over 3.8 million tonnes in 2015-16, whereas
imports were the highest (1.54 million tonnes) in 2014-15. Due to rising domestic
prices and expected gap in demand and supply particularly in the next marketing
year, the Government imposed an export duty of 20 percent on sugar w.e.f.
16th June, 2016. However, sugar exported under Advance Authorization Scheme
has been exempted from export duty. With global stocks approaching historically

low levels and expected decline in output, world sugar prices have risen sharply
over the last few months.
Structure of the Report

1.21 Chapter-2 of the Report analyzes the demand-supply situation of sugar and the
existing price policy for cane. To sensitize rational utilization of water, especially
when sugarcane is water guzzling crop, state-wise water productivities have been
analyzed along with land productivities at district, state and also across countries,
which are presented in Chapter-3. Chapter-4 looks at domestic sugar prices in
relation to international prices and trade policy with a view to building a globally
competitive sugar sector. Chapter-5 presents costs and returns on sugarcane. Finally,
major highlights of all the chapters, leading to the key price and non-price policy
recommendations, are presented in Chapter-6.
*****
Overview

Chapter 2
Demand Supply and Price Policy
2.1 Sugar is one of the most policy distorted and a cyclical commodity in the world. Its
demand and supply depend on various factors such as weather conditions, industrial
capacity, prices, trade policy, income, tastes and preferences, etc. Demand for sugar
has increased steadily over the years, supported by rising population and the growing
income, while supply has been more cyclical. The industry is currently experiencing
weather-driven supply constraints in the country. Supply has driven price dynamics
for the past few decades. This chapter discusses demand-supply dynamics and price
policy related issues.
Domestic Market Scenario

Chapter 2
2.2 Demand-supply dynamics of sugar has a major impact on production of sugarcane

as sugar is the primary product of cane. The whole gamut of primary product and
main by-products of sugarcane such as bagasse, molasses and pressmud and their
demand-supply situation has influence on right pricing of sugarcane. Like most of
the other agri-commodities, sugarcane is also produced during a particular season,
and its crushing to convert it into sugar also takes place for a few months, but its
demand is through-out the year. So the sugar millers/traders/bulk consumers have
to keep some stocks with them to meet their year round demand. While the demand
for sugar has a robust trend and is gradually increasing with rising population and
incomes, the supplies of sugar are more volatile depending upon weather, and prices
of sugarcane that farmers receive in relation to other competing crops.
2.3 The country had surplus production of sugar compared to its domestic demand
in recent years and has remained in the range of 25 to 28 million tonnes during
the last five years. Excess domestic production lead to accumulation of stocks and
downward pressure on prices till 2014-15. In the current sugar season, production is
10 2 0 1 7 - 1 8 S U G A R S E A S O N
estimated to be 25 million tonnes as compared to estimated domestic consumption
at 24 million tonnes.
2.4 The stock-to-use ratio at 33.83 percent in 2015-16, though lower than the last
year (37.03 percent), indicates comfortable position of domestic availability of
sugar in the country with a closing stock of about 9.42 million tonnes of sugar
(Table 2.1). However, the Commission expects sugar production to be lower during
2016-17 mainly driven by the severe drought conditions in Maharashtra and parts
of Karnataka leading to lower acreage and yields. Sugar prices, both domestic and
international, have increased significantly during last 12 months. For example,
domestic wholesale prices have increased by about 50 percent, from Rs. 2498/qtl
in July 2015 to Rs. 3765/qtl in July 2016. Looking at the likely crop outlook and

trade scenario, it appears that stock-to-use ratio will further decline during 2016-17
leading to higher prices. The global stock-to-use ratio is estimated to be 16.7 percent
in 2016-17, lower than 2015-16 level (20.4 percent).
Table 2.1: Balance Sheet of Sugar
(Sugar Season: October to September)
(Lakh Tonnes)
S. Particulars 2013-14 2014-15 2015-16
No. Provisional Projected
1 Net Opening Stock 91.09 77.63 102.06
2 Production 245.54 284.63 251.00
3 Imports 8.80 15.40 19.40
4 Estimated Total Availability (Row 1 + Row 2 + 345.43 377.66 372.46
Row 3)
5 Estimated Releases for Internal Consumption 243.00 256.00 240.00
6 Export against ALS/AAS obligation and OGL 24.80 19.60 38.30
7 Total Estimated Releases (Row 5 + Row 6) 267.80 275.60 278.30
8 Estimated Closing Stock (Row 4 - Row 7) 77.63 102.06 94.16
9 Stock-to-Use ratio (%) {(Row 8/ Row 7)*100} 28.99 37.03 33.83
Note: ALS/AAS: Advanced License Scheme/ Advanced Authorization Scheme

Source: Directorate of Sugar, DFPD, DGCIS
State Advised Price (SAP): A Source of Distortion

2.5 Sugarcane pricing is one of the most critical issues that impinge on growth of sugar
sector. Under the current system, the Government of India (GOI) has been fixing a
Fair and Remunerative Price (FRP) of sugarcane, based on the recommendations of
the Commission (CACP), since 2009-10 sugar season. Prior to this, the Government
was fixing the Statutory Minimum Price (SMP) of sugarcane and farmers were also

entitled to share profits of a sugar mill on 50:50 basis. The sharing provision was
introduced in the Control Order as Clause 5A in September, 1974 with the objective
of equal sharing of dividends of the sugar mills. However, it remained virtually
unimplemented mainly on account of delays in the announcement of profits by the
mills. The Sugarcane (Control) Order, 1966 was amended vide notification dated
22.10.2009 and the concept of SMP was replaced by FRP of sugarcane. A comparison
between SAPs paid to farmers and cane price payable to farmers under revenue
sharing formula (75% of total sugar value from one qtl. of cane) over the years in
Uttar Pradesh is presented in Table 2.2. It is evident from the Table that farmers
in Uttar Pradesh were paid SAP of Rs. 280 whereas they would have been paid
Rs. 256.15 per qtl. under FRP at SRR of 10.58 percent in 2015-16. However under
RSF at same SRR farmers would have got Rs. 244.50 per qtl. A similar comparison in
Maharashtra, Punjab, and Tamil Nadu is attempted separately and given in Annex
Table 2.1. A state-wise comparison of SAP and FRP is given in Annex Table 2.2.
Table 2.2: Cane Price Payable to Farmers in UP as a Percentage of Value of Sugar
Sugar Ex-Mill Cane State Total Sugar Value from Farmers share in total Cane price
Season Sugar price Recovery 1 qtl. of cane (Rs/qtl) revenue (Cane price paid payable to
Prices paid to Rate (%) to farmers/total sugar farmers under
(Rs/qtl) farmers value)*100 revenue
(SAP) sharing formula
(Rs/qtl) (75% of total
sugar value
from 1 qtl. of
cane)
At SRR At 9.5% RR At SRR At 9.5% RR At 9.5% RR
(1) (2) (3) (4) (5)=(2)*(4) (6)=(2)*9.5 (7)=(3)*100/ (8)=(3)*100/ (9)=0.75*(6)
(5) (6)
2010-11 2806.67 205.00 9.15 256.81 266.63 79.83 76.88 199.98
2011-12 3076.46 240.00 9.08 279.34 292.26 85.92 82.12 219.20
2012-13 3244.79 280.00 9.17 297.55 308.26 94.10 90.83 231.19
2013-14 3109.38 280.00 9.27 288.24 295.39 97.14 94.79 221.54
2014-15 2578.33 280.00 9.49 244.68 244.94 114.43 114.31 183.71
2015-16 3081.11 280.00 10.58 325.98 292.71 85.89 95.66 219.53
Average 92.89 92.43
Note: SRR-State Recovery Rate, RR-Recovery Rate (fixed)

Source: CACP, using data of Directorate of Sugarcane
Cane Price Arrears

2.6 Some State governments, namely, Haryana, Punjab, Tamil Nadu, Uttar Pradesh and
Uttarakhand have been announcing their own State Advised Prices (SAPs) which
are usually higher than the FRP. This, in turn, has led to mounting cane price arrears
in recent past. Year wise cane arrears since 2009-10 to 2015-16 are presented in
12 2 0 1 7 - 1 8 S U G A R S E A S O N
Chart 2.1. The cane price arrears, which recorded a steep increase during 2009-10
to 2014-15, witnessed a declining trend in 2015-16 and were Rs. 7488 crore. With
significant increase in prices of sugar during the last 12 months, it is expected that
these arrears will be settled soon.
Chart 2.1: Cane Price Arrears, 2009-10 to 2015-16
20000 35
18000
30
16000
14000 25
Rs. Crore
12000 20
Percent
10000

8000 15
6000 10
4000
5
2000
0 0
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Arrears 1151.1 2196.4 5123.9 7879.0 14095.5 19436.8 7487.6
Percent of Arrears on Price Payable 3.1 5.2 10.3 13.5 25.2 30.0 13.5
Position as on 31.05 of Sugar Season

Source: Directorate of Sugar (DFPD)
2.7 The cane arrears for sugar season 2014-15, which were Rs.15,593 crores on 31st July
2015, stood at Rs. 602 crore on 26th July 2016, as most of the arrears were paid by the
mills. The arrears for sugar season 2015-16 were about Rs. 5,696 crore (significantly
lower than last season) on 26th July 2016. State wise cane arrear position as on
26thJuly 2016 is given in Table 2.3.
2.8 As per Sugar Control Order 1966, the cane dues to the farmers are supposed to be
paid within 14 days of the delivery of the cane to the mill. In the event of mills failing
to make the payment within this time the farmers should be paid the interest for
the period for which the delay has occurred. However, it is a known fact that the
payment is not being made to the farmers in 14 days and no interest is being paid
to them. The Commission is of the considered opinion that the Government should
ensure payment of cane dues to the farmers within 14 days, failing which interest
should be paid to the farmers.

Table 2.3: State-wise Cane Arrears, upto 2015-16
(As on 26th July 2016) (Rs. Crores)
2015-16 2014-15 2013- Total
State Total Total 14 &
SAP SAP earlier SAP (SAP+FRP)
(SAP+FRP) (SAP+FRP)
Bihar 0 30 0 6 40 0 76
Haryana 126 126 11 11 0 137 137
Punjab 226 226 0 0 0 226 226
Uttarakhand 138 211 0 0 25 163 236
Uttar Pradesh 1714 3043 56 56 112 1882 3211
Andhra Pradesh 0 81 0 37 0 0 118
Telangana 0 30 0 0 0 0 30
Gujarat 0 203 0 0 13 0 216

Maharashtra 0 494 0 158 70 0 722
Karnataka 0 185 0 40 117 0 342
Tamil Nadu 551 1030 288 288 273 1112 1591
Puducherry 0 10 0 5 3 0 18
Chhattisgarh 0 1 0 0 0 0 1
Odisha 0 19 0 0 3 0 22
Madhya
0 6 0 0 13 0 19
Pradesh
Goa 0 1 0 0 0 0 1
All-India 2755 5696 355 601 669 3520 6966
Source: Directorate of Sugar, DFPD
2.9 Uttar Pradesh, which is the largest producer of sugarcane, has the highest cane
arrear of Rs.3043 crores, followed by Tamil Nadu (Rs. 1030 crore). These two States
accounted for over 70 percent of total cane arrears in 2015-16. Similarly cane price
arrears for the other states that pay SAP are also relatively high. It is worth noting that
SAP is a major distorting factor in cane pricing and cane price arrears. For example,
in Uttar Pradesh more than 55 percent of the arrears during 2015-16 (Rs. 1714 crore
out of Rs. 3043 crore) are on account of SAP. Similarly, in case of Uttrakhand nearly
two-third of arrears and in Tamil Nadu more than 50 percent of the arrears are due
to SAP. This evidence clearly shows that SAP is the main distorting factor resulting
in huge cane arrears. In addition, SAP does not incentivise efficiency in terms of
better sugar recovery as SAP is not linked to sugar recovery rate unlike FRP. The SAPs
are much above the FRP and are not based on scientific and transparent method.
In order to promote efficiency (better sugar recovery) and remove distortions in
cane pricing, the Commission strongly recommends that the system of SAPs by State
Governments should be stopped and RSF should be adopted as recommended by
Rangarajan Committee.
14 2 0 1 7 - 1 8 S U G A R S E A S O N
Revenue Sharing Formula (RSF)
2.10 The Total Revenue generated from the cane-sugar value chain is the value of sugar and
its first stage by-products namely, molasses, bagasse and press mud. A scientifically
sound and economically fair formula to share the total revenue between farmers and
millers would be to distribute it in the ratio of their relative costs in producing cane
and converting that cane into sugar and its by-products. Based on the Commission’s
earlier in-depth analysis of the sugar recovery rate, cost of sugarcane produced by
farmers and cost of converting cane into sugar and its by-products, the farmers
should get either 75 percent of the value of sugar (at 10.31 percent recovery rate)
or 70 percent of the value of sugar and each of its three major by-products, namely
bagasse, molasses and press mud (all ex-mill).

2.11 Since the sugar prices can be highly volatile, revenue sharing formula can bring
in much uncertainty about sugarcane pricing for farmers. The farmers would gain
when sugar and by-product prices are high but when the sugar prices are low,
the realization would also be low. To ensure minimum price to the farmers and
minimize discontent among sugarcane growers during downward cycle of the
sugar prices, it is recommended that farmers must be paid the FRP within the
stipulated time period, even if the final price determined by RSF goes below FRP.
For this purpose, either a separate Sugar Price Stabilization Fund (SPSF) within
the SDF could be created or Sugar Development Fund (SDF) could be used for the
purpose. This Fund would be used for payments to the farmers/millers during
the downward price movements faced by the sugar industry, specially when the
final prices determined by RSF are lower than FRP. The Commission recommends
adoption of a hybrid formula. Under this, the actual payment for the cane dues
be paid in two stages. In the first stage, farmers be paid a floor price (FRP) and
the balance payment in the second stage, after publication of quarterly ex-mill
prices of sugar to be brought out by the Directorate of Sugar (Mo CA, F&PD). Such
a rational pricing formula for sugarcane would provide a logical solution to the
travails of the sugar industry. However, in order to implement RSF, there is a need
to have effective and transparent method of collecting ex-mill prices of sugar and
by-products. Maharashtra has already implemented RSF and the sugarcane price
paid to the farmers is determined based on value of sugar, including the value of
the by-products viz., value of bagasse, value of molasses, value of pressmud and
harvesting and transporting cost. It is strongly recommended that all other major
sugarcane growing States should study the Maharashtra model and implement at
the earliest possible. Efforts are also needed to reduce growers’ cost of cultivation,
improve productivity and profitability and diversification of sugar mills into
value-added activities such as cogeneration, ethanol production, and electricity
generation as a source of renewable energy, etc., to increase revenue streams.

Sugar Development Fund (SDF)
2.12 Sugar Development Fund has been created with the objectives of development of
cane by factories in their areas, rehabilitation/modernisation of sugar factories/
projects, setting up of ethanol plants, setting up of cogeneration power projects,
and rehabilitation of potentially sick viable sugar factories and adoption of
cane development schemes, etc. The Sugar Cess Act, 1982 enabled the Central
Government to levy and collect cess as a duty of excise for the purposes of the Sugar
Development Fund. The cess is levied and collected in addition to the excise duty
collected on sugar under the Central Excise Act, 1944. The rate of cess is notified
in the Official Gazette. As per this Act, the ceiling specified was Rs. 25 per quintal
of sugar and the cess was levied and collected at the rate of Rs. 24 per quintal. The
proceeds of sugar cess levied and collected under the Sugar Cess Act, is credited to
the Consolidated Fund of India and thereafter through a budgetary process of re-
appropriation, transferred to the Sugar Development Fund (SDF).
2.13 The committed expenditure on account of various interventions undertaken to
facilitate liquidation of arrears of cane dues, such as interest subvention based
soft loans, export incentives and production assistance, leads to the need for
enhancement of the accruals in the Sugar Development Fund from cess. Pursuant
to this, Sugar Cess Act, 1982 has been amended as The Sugar Cess (Amendment)
Act, 2015. The amended Act, proposes raising the ceiling of the cess from Rs. 25
to Rs. 200 per quintal, which would lead to increase in the accruals to the Sugar
Development Fund which could also be used in facilitating modernisation and
rehabilitation of potentially sick viable sugar mills, alongwith meeting the abovesaid
committed expenditure, thereby helping cane growers. The current excise duty is
Rs. 71 per quintal of sugar.
2.14 As per the amended Act, the actual cess has been raised to Rs. 124 per quintal
against the ceiling of Rs. 200 per quintal. It is reported that the government plans
to garner around Rs. 2,500 crore by increasing the cess, which would be sufficient
enough to cover the expenses that it would incur on transferring the production
subsidy of Rs. 4.50 per quintal estimated to be around Rs. 1,147 crore per year. The
general apprehension that an increase in sugar cess levied by the government on
sugar (Rs. 100 per quintal) might lead to an increase in retail prices does not hold,
as the cess would be collected only when the retail prices are low. The cess will also
be applicable on imported sugar.
2.15 The Sugar Development Fund could be used to create distillery and ethanol capacity
across the industry to ensure adequate supply to support 10 percent blending of
automobile fuel with ethanol. The industry is yet to fully exploit bagasse-fuelled
cogeneration of power. The Centre should support investments in this field to fully
exploit the green power source. These measures will go a long way in ensuring a
stable future for the sugar industry despite the cyclical nature of this crop.
16 2 0 1 7 - 1 8 S U G A R S E A S O N
De-reservation of Sugarcane Area and Removal of Minimum Distance
Criterion
2.16 With a view to ensuring adequate supply of cane to sugar mills and crushing of entire
cane grown by farmers, Government of India delegated the power of reserving the
cane area to State Governments in July, 1966. Some State Governments have their
own enactments under which they issue mill-wise cane area reservation orders,
with the delegated powers of the Central Government. The criteria of minimum
radial distance between two sugar mills was introduced for the first time in 1980
and fixed at 30 km, which has been revised from time to time. Sugar industry was
delicensed in 1988 but Government continued with the distance requirement to
avoid competition among sugar mills to procure sugarcane. However, the Sugarcane

(Control) Order, 1966 was amended vide notification dated 10th November 2006
to give statutory backing to the norm of keeping a minimum distance of 15 km
between two mills. The State Governments were authorized to notify a minimum
distance higher than 15 km in their territory, in case they considered it necessary
and expedient in public interest to do so subject to prior approval from the Central
Government. Currently, the minimum distance between sugar factories varies from
15 km to 25 km.
2.17 The cane area reservation and the criterion for distance between mills are expected
to ensure adequate cane supply to mills and preventing unhealthy competition to
procure sugarcane, ensure crushing of the entire quantity of cane grown by farmers
in the reserved area, and improve crop productivity and sugar recovery through
provision of better technology, extension services and management practices to
sugarcane farmers. On the other hand, cane area reservation and the minimum
distance criterion force farmers to supply their cane to a particular mill even if they
have not undertaken any cane development activities and not paid the previous
dues. Sometimes, farmers have to wait for long time to deliver their cane to the
sugar mills. The millers who get secured supplies of cane without any competition
become complacent and in the process become inefficient. In view of this, if farmers
have the options to choose other mills for their cane delivery they will choose the
efficient mills thereby bringing more competition in the sector. There are mixed
reactions of the State Governments, sugar mills and other stakeholders on cane
area reservation and minimum distance criteria. Some have suggested increasing it
to 20-25 km since mills have expanded capacities as well as diversified, therefore, 15
km is too small to meet daily cane-crushing requirements of large units.
2.18 The Commission is of the view that cane area reservation and minimum distance
criteria have restricted the competition among sugar mills and created perpetual
monopolies, which has restricted farmer’s freedom to choose the buyer and is more
likely to get delayed payments and unfair price for the cane under revenue sharing
formula. The Commission thus recommends that reservation of cane area and

minimum distance requirement should be removed. The abolition of the present
system would encourage mills to enter into contract with farmers based on their
crushing capacities and cane requirements before planting of cane and also invest
in cane development activities.
Way Forward
2.19 The Government has taken various initiatives like encouraging changes in ethanol
policy, removal of excise duty on molasses, and hike in the cess to be levied for
increasing the accruals in the Sugar Development Fund to support the sugarcane
farmers and mills who were adversely affected by low sugar prices and growing
sugarcane overdues.
2.20 To develop sugar sector and also to enable sugar mills to overcome liquidity
constraints, a three-pronged strategy comprising (i) free movement and sale of
by-products of sugarcane without any end-use allocations, (ii) de-reservation
of sugarcane area and removing minimum distance criterion and (iii) adoption
of hybrid approach in determining sugarcane prices i.e. combination of Revenue
Sharing Formula (RSF) and FRP, whichever is higher, be adopted. Alongwith this, the
system of SAPs by states should also be done away with.
*****
18 2 0 1 7 - 1 8 S U G A R S E A S O N
Chapter 3
Productivity of Sugarcane
Decadal Productivity Growth
3.1 The growth of area under sugarcane accelerated to 3.1 percent per annum during
the decade of 2010s from 0.4 percent per annum during the preceding decade.
The growth in production increased to 3.4 percent per annum from 0.6 percent per
annum during this period, implying that yield of the crop has shown no improvement
during the last two decades. Uttar Pradesh, Maharashtra and Karnataka have positive
growth in both area and production, whereas Tamil Nadu has a negative growth in
area and production in 2010s. Growth in the yield was positive in Uttar Pradesh
(2.1 percent) and Tamil Nadu (0.5 percent), whereas it was negative in Maharashtra
(-2.1 percent) and Karnataka (-0.8 percent) in 2010s. The decadal productivity
performance of sugarcane is shown in Table 3.1.
Chapter 3
Table 3.1: Average Annual Growth Rates of Sugarcane, 1990s to 2010s
(percent)
1990s 2000s 2010s
Area
Uttar Pradesh 1.4 0.0 1.6
Maharashtra 5.9 8.4 5.2
Karnataka 3.9 1.8 5.5
Tamil Nadu 4.0 1.1 -1.7
All India 2.3 0.4 3.1
Production
Karnataka 7.1 2.4 4.9
Tamil Nadu 5.1 1.1 -1.3
All India 3.1 0.6 3.4
Yield
Maharashtra 0.3 0.1 -2.1
Karnataka 2.7 -0.2 -0.8
Tamil Nadu 0.8 -0.6 0.5
All India 0.9 0.0 0.3
Note: The 1990s, 2000s and 2010s refer to decade’s period from 1990-91 to 1999-2000, 2000-01 to 2009-10 and 2010-
11 to 2015-16 respectively.
Source: DES, DAC&FW.
3.2 All India area, production and productivity of sugarcane from 2006-07 to 2015-16
are exhibited in Chart 3.1. There is a cyclical trend in production and productivity
of sugarcane. Increasing trend in the productivity was observed from 2012-13 to
2014-15 and declined thereafter from 72 t/ha in 2014-15 to 71 t/ha in 2015-16. This
fluctuating trend is also reflected in the area.
Chart 3.1: All India Area, Production and Productivity of Sugarcane, 2006-07 to 2015-16
380 76
360 72
Area (lakh tonne) & Productivity (t/ha)

340 68
Production (miiion tonne)
320 64
300 60
280 56
260 52
240 48
220 44
200 40
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Production 356 348 285 292 342 361 341 352 362 352
Productivity 69 69 65 70 70 72 68 71 72 71
Area 52 51 44 42 49 50 50 50 51 50
Annual Productivity Growth

3.3 Annual growth in area, production and productivity of sugarcane for last five years
is shown in Table 3.2. Both productivity and production decreased by about 5
percent in 2012-13, the growths recovered thereafter. The growth in productivity
recovered to 3.3 percent in 2013-14 but it dropped down to 1.4 percent in 2014-15
and turned a negative growth of -0.6 percent in 2015-16. A clear cycle may be seen
in the production growth which rises continuously for 2-3 years followed by decline
for one year. This trend gives indication that sugarcane production may increase in
forthcoming season or the next.
Table 3.2: Annual Growth Rate of Sugarcane, 2011-12 to 2015-16
(percent)
2011-12 2012-13 2013-14 2014-15 2015-16
Area 3.1 -0.8 -0.1 1.5 -2.2
Production 5.4 -5.5 3.2 2.9 -2.8
Productivity 2.2 -4.8 3.3 1.4 -0.6
20 2 0 1 7 - 1 8 S U G A R S E A S O N
Sugarcane Production and Productivity in the Major Producing States
3.4 The state of Tamil Nadu (104.4 t/ha) has the highest productivity of sugarcane
in India followed by Karnataka (89 t/ha), Maharashtra (79.2 t/ha), Uttar Pradesh
(63.2 t/ha) and Bihar (54.7 t/ha) (Chart 3.2). Uttar Pradesh accounts for 38.7 percent
of total production of sugarcane, followed by Maharashtra (21.9 percent), Karnataka
(11.3 percent) and Tamil Nadu (8.2 percent). The productivity in the states of
Karnataka, Maharashtra and Tamil Nadu show a cyclical trend (Chart 3.3). In case
of Uttar Pradesh, there is a steady marginal improvement in the productivity from
2010-11 onwards.
Chart 3.2: State-wise Production and Productivity of Sugarcane, TE2015-16

120.0 60
100.0 50
Production share (%)

80.0 40
Productivity (t/ha)
60.0 30
40.0 20
20.0 10
0.0 0
UP MH Kar TN Bihar Guj AP India
Productivity 63.2 79.2 89.0 104.4 54.7 70.6 76.1 71.0
Prod share 38.7 21.9 11.3 8.2 3.9 3.7 3.3
Source: DES
Chart 3.3: State-wise Productivity of Sugarcane, 2006-07 to 2015-16
120
100
t/ha
80
60
40
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Karnataka 87.9 85.8 83.0 90.3 93.8 90.3 84.1 90.3 91.2 85.5
Maharashtra 74.9 80.9 79.0 84.9 84.9 84.9 74.6 82.1 82.2 73.2
Tamil Nadu 105.1 107.5 106.2 101.5 108.4 111.4 97.7 103.6 106.8 103.0
Uttar Pradesh 59.2 57.5 52.3 59.3 56.7 59.6 59.9 60.5 62.2 67.0
Source: DES

District-level Productivity of Sugarcane
3.5 With a view to assess the performance of sugarcane yield at district level over time,
the area shares under different yield bands at district level are analyzed in the major
producing states. The changes in area under different yield bands from 2000-01 to
2013-14 are shown in Table 3.3.
3.6 Major sugarcane growing states are Uttar Pradesh, Maharashtra, Karnataka and
Tamil Nadu. Yield bands considered for the analysis are <50 t/ha, 50-80 t/ha and
>80 t/ha. In Uttar Pradesh, 35 districts with area share of 83.5 percent were under
the yield band of 50-80 t/ha in 2000-01. This share increased to 97.1 percent in
2013-14, as 62 districts belong to this category. Despite the largest production
share, productivity has not improved significantly in the State. Maharashtra is the
second largest producer of sugarcane with 55.7 percent area under >80 t/ha yield in
2000-01 and it improved to 69.7 percent in 2013-14. The remaining 30.3 percent of
the area was under 50-80 t/ha yield band in 2013-14.
3.7 In case of Karnataka, most of the districts (87 percent area) belong to yield band of
>80 t/ha in 2000-01 and this has slightly decreased to 85.9 percent area in 2013-
14. Sugarcane productivity of Tamil Nadu is the highest in India and the State
contributed 8.4 percent to the total production in 2015-16. All districts in Tamil
Nadu had productivity of >80 t/ha in 2000-01 and the share of districts with this
yield band however decreased to 87.1 percent in 2013-14. This is mainly due to
significant decline of yield in Shivaganga, Dharmapuri, Pudukkottai and Tirunelveli
districts.
Table 3.3: District Level Productivity of Sugarcane
<50 t/ha 50-80 t/ha > 80 t/ha

Year No. of No. of No. of
Area (%) Area (%) Area (%)
Districts Districts Districts
Uttar Pradesh (41.4%)
2000-01 34 16.5 35 83.5 0 0.0
2013-14 13 2.9 62 97.1 0 0.0
Maharashtra (23.0%)
2000-01 0 0.0 17 44.3 10 55.7
2013-14 0 0.0 15 30.3 13 69.7
Karnataka (11.7%)
2000-01 0 0.0 5 13.0 20 87.0
2013-14 0 0.0 4 14.1 21 85.9
Tamil Nadu (8.4%)
2000-01 0 0.0 0 0.0 19 100.0
2013-14 0 0.0 3 12.9 19 87.1
Note: Figures in parenthesis indicate share in total production, TE 2015-16
22 2 0 1 7 - 1 8 S U G A R S E A S O N
Productivity in India vis-à-vis Major Producing Countries
3.8 In the context of global competitiveness and rising domestic demand, productivity
levels of sugarcane are compared with those of major producing countries and their
yields are taken as benchmarks to envision India’s position vis-à-vis other major
producing countries in the world. The gap in the productivity i.e. ‘efficiency gap’
is measured as [Efficiency Gap = (1-Actual yield/Maximum yield)*100]. It may be
seen from Chart 3.4 that Guatemala, Colombia, Australia, U.S.A., Thailand, Mexico
and Brazil have higher productivities of sugarcane than India. The productivity of
sugarcane in India (69.5 t/ha) is slightly less than the average sugarcane productivity
of the world (70.3 t/ha). The efficiency gap between the productivity of India
and benchmarking country is 29.7 percent. Similarly, In India, the efficiency gap
between the benchmarking state (Tamil Nadu) and All India average productivity is
32 percent. These efficiency gaps are 14.8 percent, 24.2 percent and 39.5 percent,
respectively, in the states of Karnataka, Maharashtra and Uttar Pradesh. In order to
improve the productivity at state level, Krishi Vigyan Kendra (KVKs) can be entrusted
with dissemination of services ranging from modern scientific cultivation practices,
improved sugarcane sets, use of bio-control agents and farm mechanization.
Chart 3.4: Benchmarking Sugarcane Productivity and Efficiency Gaps
120 60
World (TE 2014) India (TE 2015-16)
100 50
Efficiency gap (percent)

80 40
Yield (t/ha)
60 30
40 20
20 10
0 0
Gaut Col Aus USA Thai Mex Braz India World TN Kar MH UP India
Yield 99.0 88.2 80.2 78.4 76.4 74.0 73.4 69.5 70.3 104.4 89.0 79.2 63.2 71.0
Effi gap 10.9 19.0 20.8 22.8 25.2 25.8 29.7 28.9 14.8 24.2 39.5 32.0
Source: FAO and DES
Capacity Utilization of Sugar Mills in India

3.9 State-wise sugar mills and sugar production are shown in Table 3.4. Maximum number
of sugar mills are operating in Maharashtra, which produced 105 lakh tonne of sugar

from 179 sugar mills. The top three sugarcane producing states, viz Uttar Pradesh,
Maharashtra and Karnataka contributed about 80 percent of sugar production of
the country. These states have 68 percent of operating sugar mills of the country.
Even though Uttar Pradesh is the largest producer of sugarcane, its sugar production
is lower as compared to Maharashtra. This is because of sugar recovery in Uttar
Pradesh (9.49 percent) is lower than Maharashtra (11.67 percent).
3.10 Sugar recovery in Maharashtra (11.67 percent), Karnataka (10.90 percent), Gujarat
(10.48 percent), Madhya Pradesh (10.48 percent) and Telangana (10.47 percent)
is better than all India average of 10.44 percent. This shows that sugar recovery in
tropical states of the country is slightly higher than sub-tropical states with exception
of Tamil Nadu having sugar recovery of 8.1 percent.
Table 3.4: State-wise Sugar Mills, Sugar Production and Sugar Recovery, 2014-15
State Number of Installed Sugar Sugar Recovery

Sugar Mills Capacity Production (percent)
(lakh tonne) (lakh tonne)
Maharashtra 179 106 105 11.67
Uttar Pradesh 118 95 71 9.49
Karnataka 65 42 50 10.90
Tamil Nadu 43 29 13 8.10
Andhra Pradesh 22 11 6 9.72
Gujarat 19 15 11 10.48
Punjab 16 6 5 9.37
Madhya Pradesh 16 4 4 10.48
Haryana 14 6 6 9.89
Bihar 11 6 5 9.10
Telangana 10 4 3 10.47
Total 533 329 285 10.44
Note: Data as on 30.09.2015
Source: Directorate of Sugar
3.11 State-wise installed capacity and capacity utilization of sugar mills is shown in
Chart 3.5. Capacity Utilization of sugar mills is the highest in Karnataka (118 percent)
followed by Maharashtra (99 percent), Gujarat (78 percent) and Uttar Pradesh
(75 percent). Utilization capacity of sugar mills in Tamil Nadu was 44 percent despite
the fact that sugarcane productivity of the state is highest compared to major
sugarcane producing countries and the state is fourth largest producer of sugarcane
in India. In 2015-16, an estimate shows decline sugarcane production in the state,
which may further increase the unutilized capacity of sugar mills.
24 2 0 1 7 - 1 8 S U G A R S E A S O N
Chart 3.5: State-wise Installed Capacity and Capacity Utilization of Sugar Mills, 2014-15
120 120
100 100
Installed Capacity (lakh tonne)
Capacity Utilization (Percent)

80 80
60 60
40 40
20 20
0 0
MH UP Kar TN AP Guj
Installed capacity 106 95 42 29 11 15
Capacity utilization 99 75 118 44 51 78
Note: data as on 30.09.2015

Source: Directorate of Sugar
Recapitulation
3.12 Despite large share in total sugarcane production, productivity in Uttar Pradesh is
63.2 t/ha, which is lower than all India average of 71.0 t/ha. Hence there is a need
for increasing productivity in the state. In order to improve the productivity, KVKs
should accelerate dissemination and demonstration of modern scientific cultivation
practices, improved sugarcane sets for planting, use of bio-control agents and farm
mechanization.
3.13 There are cyclical fluctuations in production of sugarcane and sugar in the country
and therefore, sugar policy decisions should take this fact into consideration. Also,
there are inter state variations in sugar recovery and capacity utilization of sugar mills.
Sugar mills should operate efficiently at full capacity level without the constraint of
inadequate availability of sugarcane for crushing. Therefore, efforts should be made
to enhance productivity in the state like Uttar Pradesh and popularize varieties with
higher sugar recovery.
*****

Chapter 4
Trade Competitiveness of Indian Sugar 04.08.206
Chapter-4
Trade Competitiveness of Indian Sugar
Global Scenario: Production and Trade in Sugar
4.1 Global
Sugarcane andProduction
Scenario: Sugar beet are
and the inmain
Trade Sugarsources of sugar. Approximately 80 percent
of global sugar is produced from sugarcane whereas 20 percent is produced from
4.1 Sugarcane
sugar beet. and As
Sugar
perbeet
FAO,areglobal
the main sources of of
production sugar. Approximately
sugarcane was 1.88 80 percent
billion of global in
tonnes
sugar
TE2014.is produced
Brazil is from sugarcane
the largest whereasof20sugarcane
producer percent is with
produced fromofsugar
a share 39.5 beet.
percentAs (0.74
per
FAO, global
billion production
tonnes). Otherof major
sugarcane was 1.88ofbillion
producers tonnesare
sugarcane in TE 2014.
India Brazil
(18.7 is the largest
percent), China
producer of sugarcane with a share of 39.5 percent (0.74 billion tonnes).
(6.7 percent) and Thailand (5.4 percent) [Chart 4.1a]. As per FAO, global production Other major
producers of sugarcane are India (18.7 percent), China (6.7 percent) and Thailand (5.4 percent)
of sugar beet was 0.26 billion tonnes in TE2014. EU is the largest producer of sugar
[Chart 4.1 (a)]. As per FAO, global production of sugar beet was 0.26 billion tonnes in TE 2014.
beet with a share of 45.1 percent (0.12 billion tonnes). Other major producers of
Chapter 4
EU is the largest producer of sugar beet with a share of 45.1 percent (0.12 billion tonnes).
sugar beet are Russia (15.0 percent), USA (11.5 percent), and Turkey (6.1 percent)
Other major producers of sugar beet are Russia (15.0 percent), USA (11.5 percent), and Turkey
[Chart 4.1b].
(6.1 percent) [Chart 4.1 (b)].
Chart 4.1a & b: Major Producers of Sugarcane and Sugar Beet, TE2014
Chart 4.1 (a) & (b): Major Producers of Sugarcane and Sugar beet, TE 2014
a: Sugarcane
a: Sugarcane b: Sugar
b: Sugar beet Beet
Russia
15.0%
India India USA
Brazil
Brazil 18.7% 18.7% 11.5%
39.5%
39.5%
Turkey
6.1%
ChinaChina
6.7% 6.7% Ukraine
Thailand 5.7%
Thailand
5.4%5.4% Egypt
EU
Pakistan
Pakistan 3.9%
45.1% China
3.4% 3.4%
Mexico
Mexico 3.7%
Others
Others 3.0% 3.0% Others
23.3%23.3% 9.0%
Source: FAO
Source: FAO
26 2 0 1 7 - 1 8 4.2
S U GAsA R
perSUSDA,
E A S OGlobal
N production of sugar was 172.7 million tonnes in TE 2015-16 out of which
32 percent was traded. Brazil is the largest producer of sugar with a share of 20.9 percent (36.1
million tonnes). Other major producers of sugar are India (16.4 percent), EU (9.4 percent),
China (6.5 percent), Thailand (6.1 percent) and USA (4.6 percent) [Chart 4.2].
4.2 As per USDA, Global production of sugar was 172.7 million tonnes in TE2015-16 out
of which 32 percent was traded. Brazil is the largest producer of sugar with a share
of 20.9 percent (36.1 million tonnes). Other major producers of sugar are India (16.4
percent), EU (9.4 percent), China (6.5 percent), Thailand (6.1 percent) and USA (4.6
percent) [Chart 4.2].
Chart 4.2: Major Producers of Sugar, TE2015-16
India
16.4% EU
9.4%

Brazil
20.9% Thailand
6.1%
China
6.5%
USA
4.6%
Mexico
Others 3.7%
32.4%
Source: USDA
4.3 Global export of sugar, as per USDA, was 55.9 million tonnes in TE2015-16 with
Brazil as the largest exporter of sugar in the world with a share of 44.4 percent
(24.8 million tonnes) [Chart 4.3a]. Other major exporters of sugar are Thailand
(14.5 percent), Australia (6.2 percent), India (4.9 percent) and Guatemala
(4.0 percent). The share of top five exporters in total exports is about 75 percent.
China is the largest importer of sugar with a share of 10.2 percent (5.3 million tonnes).
Other major importers of sugar are Indonesia (6.3 percent), EU (6.2 percent), USA
(6.1 percent), UAE (4.4 percent) and Bangladesh (4.1 percent) [Chart 4.3b]. There
has been an increased concentration of sugar export trade with rising dominance of
Brazil, while sugar imports are more diverse with China being the largest importer.
Chart 4.3a & b: Major Exporters and Importers of Sugar, TE2015-16

a: Exporters b: Importers
Thailand Australia USA UAE Bangladesh Malaysia
EU
6.2% 6.1% 4.4% 4.1% 3.8%
14.5% 6.2% Korea
India
4.9% Indonesia South
6.3% 3.6%
uatemala China Algeria
4.0% 10.2% 3.5%
Mexico Nigeria
3.2% 2.8%
Saudi
EU Arabia
2.8% 2.6%
Japan
2.5%
Others Egypt
Brazil 2.2%
44.4% 20.0%
Iran Canada
Others
2.1% 2.2%
37.4%
Source: USDA

India’s Trade in Sugar
4.4 India is currently the 4th largest exporter of sugar in the world. India has been
generally a net exporter of sugar. However, it has been occasional net importer
of sugar depending upon demand and supply situation in the country. During
the period 2004-05 to 2015-16, India has been a net exporter of sugar except in
2004-05, 2005-06 and 2009-10 when it was a net importer of sugar [Chart 4.4a and b].
India’s exports of sugar were the highest in 2007-08 (46.8 lakh tonnes) and lowest in
2009-10 (0.4 lakh tonnes) [Chart 4.4a], whereas, imports of sugar were the highest
in 2009-10 (25.5 lakh tonnes) and lowest in 2007-08 (negligible) [Chart 4.4b].
Chart 4.4a & b: India’s Exports and Imports of Sugar, 2004-05 to 2015-16
Chart 4.4a: Exports of Sugar
50 12000
45
40 10000
35
Lakh Tonnes
8000
Rs. Crore
30
25 6000
20
15 4000
10 2000
5
0 0
2004-05 2005-06 2006-07 2007-08 2008-09 2009
9-10 2010-11 2011-12 2012-13 20113-14 2014-15 2015-16
Quantity 1.1 3.2 16.4 46.8 33.3 0.4 17.3 27
7.4 27.9 24.8 19.6 38.3
3
Value 150 569
9 3127 541
12 4449 11
10 5473 87
767 8577 71
179 5329 9777
9
Source: DGCIS
Chart 4.4b: Imports of Sugar
30 7000
25 6000
5000
20
Lakh tonnes
Rs. Crore
4000
15
3000
10
2000
5 1000
0 0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Quantity 9.3 5.6 0.0 0.0 3.9 25.5 12.0 1.0 11.2 8.8 15.4 19.4
Value 978 654 7 6 583 5966 2790 314 3094 2287 3668 4038
Source: DGCIS
28 2 0 1 7 - 1 8 S U G A R S E A S O N
Trade Policy
4.5 Till January 15, 1997, exports of sugar were canalized through the notified export
agencies, viz. Indian Sugar & General Industry Export Import Corporation Ltd. (ISGIEIC)
and State Trading Corporation of India (STC). Exports of sugar were decanalized
w.e.f. 15th January, 1997 and permitted subject to obtaining Registration-cum-
Allocation Certificate (RCAC) from Agricultural and Processed Food Products Export
Development Authority (APEDA). This requirement of issue of RCAC by APEDA was
dispensed with from April, 2001 and exports of sugar were allowed after obtaining
the export release order from Directorate of Sugar, Department of Food and Public

Distribution.
4.6 The Government banned export of sugar from June, 2006 to March, 2007 to curb
rise in its prices in the domestic market. However, in view of higher production
of sugar during 2006-07 sugar season, the Government relaxed ban on export in
January, 2007 i.e. before the stipulated expiry of ban and allowed exports against
advance licences and thereafter for exports under Open General Licence (OGL).
Due to higher production anticipated in 2007-08 sugar season, the Government
dispensed with the requirement of obtaining export release orders from the
Directorate of Sugar from July 2007 to December, 2008. However, as production
levels during 2008-09 and 2009-10 sugar seasons were expected to be lower, the
Government re-introduced the requirement of obtaining release orders in respect
of exports under OGL from January, 2009. Sugar production improved in 2010-11
and 2011-12 and due to comfortable stocks in the country, exports of 15 lakh tonnes
in 2010-11 and 20 lakh tonnes in 2011-12 were allowed under OGL through release
order mechanism.
4.7 The Government has dispensed with the requirement of export release orders from
Directorate of Sugar in May, 2012. Free export of sugar has been allowed subject to
prior registration of quantity with DGFT w.e.f. May, 2012. Due to high production
of sugar in the world since 2012-13 sugar season, the international prices of sugar
were depressed thereby making export of sugar from India unviable. To encourage
sugar factories to export raw sugar, a scheme was notified in February, 2014 to give
incentives for marketing and promotion of raw sugar production targeted for export
markets for a quantity of 40 lakh tonnes during 2013-14 and 2014-15 sugar season
with the condition that the incentives available under the Scheme shall be utilized
by the sugar mills for making payment to the farmers. The incentive amount was
increased to Rs.4000 per MT for export of raw sugar during 2014-15 sugar season
subject to ceiling of 14 lakh MT.
4.8 In view of the inventory levels with the sugar industry and to facilitate achievement
of financial liquidity, the Government vide order dated the 18th September, 2015
allocated sugar factory-wise Minimum Indicative Export Quotas (MIEQ) under

tradable export scrip scheme during 2015-16 sugar season. Under the scheme,
export quotas of 40 lakh tonnes of all grades of sugar; namely raw sugar, plantation
white as well as refined, were pro-rated among sugar factories by taking into account
their average sugar production of three years including the current (estimated/
provisional) and last two sugar seasons. The Government notified the Production
Subsidy Scheme on 2nd December, 2015 vide which a production subsidy @ Rs.4.50
per quintal of cane crushed for production of sugar was provided to offset the cost
of cane purchased by the sugar mills and the said subsidy shall be paid directly to the
farmers on behalf of the mills and be adjusted against the cane price payable due to
the farmers against FRP including arrears relating to previous years. However, the
Government withdrew the Production Subsidy Scheme vide Notification dated 19th
May, 2016 with immediate effect, after having been satisfied with the assessment
that sugar prices are now substantially higher than levels required for operational
viability of the sugar industry. The Government also withdrew the order dated 18th
September, 2015 regarding allocation of Minimum Indicative Export Quota (MIEQ)
of sugar for export during current sugar season 2015-16, vide order dated 8th June,
2016 with immediate effect. It was communicated to all sugar mills, that keeping in
view the current scenario particularly prices and stocks of sugar in the country, it is
no longer obligatory on the part of sugar mills to further undertake export of sugar.
4.9 The Government has imposed an export duty of 20 percent on sugar on 16th June,
2016 to ensure adequate availability of sugar in the domestic market and to keep
the domestic prices under check. However, as per subsequent Notification dated 6th
July, 2016, sugar exported under Advance Authorization Scheme has been exempted
from export duty.
4.10 Import of sugar was placed under OGL with zero duty in March, 1994. The
Government imposed a basic custom duty of 5 percent and a countervailing duty
of Rs. 850 per tonne on imported sugar in April, 1998. This duty was increased
in a phased manner to 60 percent in February, 2000 along with continuance of
countervailing duty of Rs. 850 per tonne (increased to Rs. 950 per tonne in March,
2008 plus 3 percent education cess). During 2008-09 and 2009-10 sugar seasons,
the domestic sugar production declined, so in order to augment the domestic stocks
of sugar, the Government allowed import of raw sugar under Advance Authorization
Scheme by sugar mills at zero import duty from February, 2009 to September, 2009
and also allowed import of raw sugar at zero import duty under OGL from April,
2009 which was applicable till June, 2012.
4.11 The Government re-imposed import duty of 10 percent in July, 2012 which was
further increased to 15 percent in July 2013 and 25 percent in August, 2014 in view
of decline in international prices of sugar so as to give protection to domestic sugar
industry. Import duty on sugar was further increased to 40 percent in April, 2015 to
30 2 0 1 7 - 1 8 S U G A R S E A S O N
discourage imports in view of depressed domestic and international prices where
international prices have been continuously lower than domestic prices.
4.12 Domestic wholesale prices of refined sugar (Mumbai) have been compared
with international prices of refined sugar traded at LIFFE during the period from
2011 Q1 to 2016 Q2. It may be observed from Chart 4.5 that domestic wholesale
prices of sugar have generally followed the trend of international prices. India’s
exports of sugar are mainly to neighbouring countries such as Sri Lanka, Bangladesh,
Pakistan and Myanmar, Middle-east countries such as UAE, Saudi Arabia, Iran,
Jordan, Iraq and Yemen and North-east African countries such as Sudan, Somalia,

Tanzania, Kenya, Djibouti and Ethiopia which are comparatively nearer to India than
the main competitors like Brazil, Thailand and Australia. The difference in freight
charges is making it possible for India to export sugar to these countries.
Chart 4.5: International and Domestic Wholesale Prices of Sugar,

2011 Q1 to 2016 Q2
3800
3500
Rs./Quintal
3200
2900
2600
2300
2000
201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201 201
1 Q1 1 Q2 1 Q3 1 Q4 2 Q1 2 Q2 2 Q3 2 Q4 3 Q1 3 Q2 3 Q3 3 Q4 4 Q1 4 Q2 4 Q3 4 Q4 5 Q1 5 Q2 5 Q3 5 Q4 6 Q1 6 Q2
Domestic Price 2904 2815 2890 3049 2988 3022 3542 3565 3328 3209 3180 3066 2885 3244 3217 3002 2773 2568 2450 2818 3275 3672
International Price 3396 2948 3392 3269 3205 3155 3225 2878 2758 2744 3005 2931 2758 2829 2643 2550 2375 2293 2279 2639 2803 3220
Source: LIFFE for International Prices and Ministry of Consumer Affairs for Domestic Prices at Mumbai.
Global Outlook
4.13 According to OECD-FAO Agricultural Outlook for 2016-2025, global sugar production
is projected to increase by 2.1 percent per annum over the ten year period to reach
210 million tonnes by 2025. Most of the additional production is expected to originate
from countries producing sugarcane rather than sugar beet and output growth is
attributed to area expansion, especially in Brazil, even though yield improvements
are expected for sugar crops and sugar processing in some other producing countries
such as India and Thailand. It is projected that the share of sugarcane allocated to
ethanol will continue its upward trend and 22 percent of sugarcane in 2025 will be
allocated to ethanol production (from 21 percent during the base period 2013-15)

and the share of sugar beet allocated to ethanol (5 percent in base period 2013-15)
will decrease slightly to 3 percent in 2025. The likely international prices of sugar,
as per projections of OECD-FAO Agricultural Outlook for 2016-2025 are indicated in
Table 4.1.
Table 4.1: Forecast of International Prices of Sugar, 2016 to 2025
Price Forecast (US $/tonne)

Commodity
2016 2019 2022 2025
Raw Sugar 325.3 335.8 333.1 341.9
Refined Sugar 398.6 405.8 408.8 424.5

Source: OECD-FAO Agricultural Outlook for 2016-2025
4.14 The FAO Sugar Price Index averaged 276.0 points in June, 2016 up as much as
35.6 points from 240.4 points in May, 2016 which also was up by 25.1 points (11.7
percent) from 215.3 points in April, 2016. As per FAO, this surge mostly reflected
less positive production prospects in Brazil, the world’s largest sugar producer and
exporter, following heavy rains which hampered harvesting operations and affected
sugar yields. Domestic and international prices of sugar have increased from
2015 Q3 onwards due to decline in the global production in 2015-16. Sugar prices
are likely to remain at high level in the short term. The indications of above normal
rainfall (2016 monsoon) will help increase production of sugarcane/sugar in India
in 2016-17 sugar season which is expected to put downward pressure on prices of
sugar.
*****
32 2 0 1 7 - 1 8 S U G A R S E A S O N
Chapter 5
Costs, Returns and Inter-Crop Price

Parity
5.1 Cost of production (CoP) is one of the important factors in the determination of Fair
and Remunerative Price (FRP) of sugarcane. The Commission uses the cost estimates
furnished by DES, Ministry of Agriculture and Farmers Welfare under Comprehensive
Scheme (CS) for Studying the Cost of Cultivation of Principal Crops in India. Since, CS
data is generally available with a time lag of two years, it needs to be projected for
the ensuing crop year 2016-17 i.e. sugar season 2017-18 state-wise and at all-India
Chapter 5
level. These projected cost estimates are factored into formulation of price policy
recommendations.
5.2 The Commission has projected CoP estimates for sugar season 2017-18, based on
actual estimates for the latest three years viz. 2012-13 to 2014-15 for each state.
These three projections capture movement in overall input cost separately for the
crop year 2016-17 over each of the year’s viz. 2012-13, 2013-14 and 2014-15. An
assessment of overall movement in input cost likely for the crop year 2016-17 with
reference to each of the three consecutive years ending with 2014-15 is made by
constructing the Composite Input Price Index (CIPI) based on latest prices of different
inputs like human labour, bullock labour, machine labour, seeds, fertilizers, manures,
insecticides and irrigation charges sourced from Labour Bureau, State Governments,
Office of the Economic Adviser (OEA), Ministry of Commerce and Industry, Fertilizers
Association of India (FAI) etc. Based on CIPI thus constructed, the Commission then
projected CoP for 2017-18 sugar season.
Costs and Returns of Sugarcane during 2012-13 to 2014-15

5.3 Profitability can be seen from three angles. The first is gross returns over A2 which
is defined as gross value of output less costs A2, second is gross returns over A2+FL
which is defined as gross value of output less costs A2+FL and the third is net returns

which represent gross value of output less costs C2. The average returns (both gross
and net) during 2012-13 to 2014-15 for sugarcane are presented in Table 5.1 and
Chart 5.1. Gross returns as percent of cost A2 and A2+FL are maximum for Uttarakhand
at 326 and 214 percent, respectively. The rate of return over C2 cost during this
period stands at 52 percent at all India level, and ranges from 32 percent in Andhra
Pradesh to 83 percent in Uttarakhand.
Table 5.1: Gross and Net Returns of Sugarcane (TE2014-15)
Cost A2 Cost Cost C2 GVO Gross Returns over Gross Returns over Net Returns
Costs, Returns and Inter-Crop Price Parity
A2+FL A2 A2+FL
S.
State Rs./ha. Percent Rs./ha. Percent Rs./ha. Percent
N.
Rs./ha. (Col.6- (Col.7/ (Col.6- (Col.9/ (Col.6- (Col.11/
Col.3) Col.3*100) Col.4) Col.4*100) Col.5) Col.5*100)
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
1 AP 64585 74660 120486 159642 95057 147 84982 114 39156 32
2 Har 50696 55485 110570 165395 114700 226 109910 198 54825 50
3 Kar 54336 66616 109394 174732 120396 222 108117 162 65338 60
4 Mah 111359 127264 176753 236205 124846 112 108940 86 59452 34
5 TN 103890 122909 158954 235760 131871 127 112851 92 76806 48
6 UP 36853 51150 90898 153014 116161 315 101864 199 62116 68
7 UK 33745 45750 78654 143641 109896 326 97891 214 64987 83
ALL INDIA 61985 76429 118746 180556 118571 191 104127 136 61810 52
Notes: 1. A2 cost includes all expenses in cash and kind on account of hired labour including human, bullock, machine,
seed, insecticides, pesticides, manure, fertilizers, irrigation charges and miscellaneous expenses.
2. A2+FL cost includes A2 and family labour.
3. C2 cost includes A2+FL cost, rental value of owned land and interest on owned fixed capital.
Source: CACP Calculations based on data received under Comprehensive Scheme for Studying the Cost of Cultivation of
Principal Crops in India, DES, Ministry of Agriculture and Farmers Welfare.
Chart 5.1: Gross and Net Returns of Sugarcane (TE2014-15)
135000
125000
115000
105000
95000
Rs./Śa.
85000
75000
65000
55000
45000
35000
AP Har Kar Mah TN UP UK All India
Gross Returns Over A2 95057 114700 120396 124846 131871 116161 109896 118571
Gross Returns Over A2+FL 84982 109910 108117 108940 112851 101864 97891 104127
Net Returns 39156 54825 65338 59452 76806 62116 64987 61810
Source: CACP calculations
34 2 0 1 7 - 1 8 S U G A R S E A S O N
Labour and Input Price Movement
5.4 Chart 5.2a and 5.2b depict annual average growth in wage rates of agricultural
labour in major states and at all-India level both at current prices and constant
prices (2015-16=100), respectively. At all-India level, increase in agricultural labour
wage was 18.7 percent in 2013-14, 12.8 percent in 2014-15 and it further slowed
down to 3.7 percent in 2015-16 at current prices. The increase in real wages was 8.0
percent, 6.9 percent and -1.3 percent in corresponding years. The annual average
for a year is normally from July to June. This reflects a declining trend in growth of

agricultural labour wages over the last three years. Further, Chart 5.2c reflects annual
average daily wages of agricultural labour during 2015-16 and growth in wages in
2015-16 over 2014-15. The state-wise and all-India details of monthly average daily
wage rates of agricultural labour in nominal terms for major states are given in
Annex Table 5.1.
Chart 5.2a: Annual Average Growth in Wages of Agricultural Labour

(2013-14 to 2015-16 at Current Prices)
37.0
30.0
23.0
Growth (%)
16.0
9.0
2.0
-5.0
All
AP Ass BH GJ HR HP Kar Ker MP MH Odi Pun Raj TN UP WB
India
Growth (2013-14) 4.5 26.3 23.9 23.9 35.6 24.6 26.3 19.9 20.0 16.4 21.6 8.8 14.6 29.1 17.9 24.2 18.7
Growth (2014-15) 7.3 22.2 16.2 21.6 7.3 9.0 9.1 11.4 18.1 5.9 18.8 3.7 17.8 23.9 6.9 9.1 12.8
Growth (2015-16) 6.6 4.0 9.4 6.5 3.2 6.3 12.3 6.3 4.5 2.9 -0.5 1.1 -3.2 -4.0 7.2 3.8 3.7
Source: Labour Bureau, Shimla

Note: For the year 2015-16 the annual average is from July, 2015 to May, 2016

Chart 5.2b: Annual Average Growth in Wages of Agricultural Labour
(2013-14 to 2015-16 at Constant Prices 2015-16 = 100)
24.0
20.0
16.0
Growth (%)
12.0
8.0
4.0
0.0
-4.0
-8.0
-12.0
All
AP Ass BH GJ HR HP Kar Ker MP MH Odi Pun Raj TN UP WB
India
Growth (2013-14) -6.5 16.5 10.6 10.7 23.5 11.7 14.7 3.4 12.7 10.0 7.5 0.03 4.4 15.5 6.8 11.4 8.0
Growth (2014-15) 0.7 14.6 11.8 14.9 0.4 2.3 2.7 2.4 15.7 -1.1 11.0 -1.1 11.3 14.7 3.5 5.5 6.9
Growth (2015-16) 0.3 2.1 8.1 0.3 -0.1 1.7 4.2 2.3 0.1 -2.4 2.7 -2.3 -7.7 -11.4 0.9 2.9 -1.3
Chart 5.2c: Annual Average Daily Wages of Agricultural Labour 2015-16 and Growth in
Wages 2015-16 over 2014-15
700 14.0
600 12.0
Average Daily Wages (Rs.)
500 10.0
Growth in Wages (%)

400 8.0
300 6.0
200 4.0
100 2.0
0 0.0
-100 -2.0
-200 -4.0
-300 -6.0
All-
KER TN HP HR Pun RAJ KRN AP WB BH ASS MH UP GJ ODI MP
India
Avg Daily Wages 662 393 373 356 302 286 280 256 256 246 245 237 232 217 206 200 186
Growth in wages 2015-16 6.3 -4.0 6.3 3.2 1.1 -3.2 12.3 3.7 6.6 3.8 9.4 4.0 2.9 7.2 6.5 -0.5 4.5
5.5 Chart 5.3 exhibits average trend of prices of farm inputs based on WPI 2004-05=100
during March to May, 2016 over March to May, 2015. While the prices of fertilizers,
electricity for irrigation, tractors, cattle feed, fodder, pesticides and non-electrical
machinery have increased in the range of 0.3 percent to 14.4 percent, that of HSD
has declined by 6.3 percent and in case of lubricant, the price remained the same
during the corresponding period (details in Annex Table 5.2).
36 2 0 1 7 - 1 8 S U G A R S E A S O N
Chart 5.3: Movements in Prices of Farm Inputs
(March-May, 2016 over March-May, 2015)
16.0 400
14.0 350
12.0 300
10.0 250
8.0 200
WPI
Percent
6.0 150
4.0 100
2.0 50
0.0 0

-2.0 -50
-4.0 -100
-6.0 -150
-8.0 -200
Non-
Diesel Elect. Cattle
Ferti. Trac. Lub. Fodder Pest. Elect.
(HSD) (Irr.) Feed
(Mach.)
Price Index (March to May,2015) 202.8 156.4 217.9 153.0 277.5 260.4 279.5 136.3 127.6
Price Index (March to May,2016) 190.1 159.0 220.6 153.4 277.5 282.8 319.8 139.1 128.0
Change in Price (%) -6.3 1.7 1.2 0.3 0.0 8.6 14.4 2.1 0.3
Source: DIPP, Ministry of Commerce and Industry
5.6 Chart 5.4 depicts the share of human labour at 33.4 percent in the total cost of
production (C2) in TE2014-15. Since the wage rates have been increasing rapidly
in the recent years and there is high share of human labour in the total cost of
production, it is imperative to encourage farmers to adopt farm mechanization in a
big way so as to improve productivity (Also see Annex Table 5.1).
Chart 5.4: Share of Inputs in Total Cost of Production (C2), TE2014-15
Others
14.6% Human
Labour
33.4%
Fertilizer
7.8%
Capital
12.9%
Land
31.3%

Cost Projections, Sugar Season 2017-18
5.7 Based on the state-wise costs and CIPI, an all India weighted average cost of
production, with weights being relative shares of the states in the total production in
TE2015-16 of sugarcane is projected for the crop year 2016-17. The projected costs
of cane for various states for the crop year 2016-17 have been adjusted at uniform
recovery rate of 9.5 per cent, using state wise recovery rates. For illustration, the
projected cost of production A2+FL and C2 of Uttar Pradesh is Rs.160 and Rs.232
per quintal respectively, the recovery rate is 9.44 and using this, the projected cost
adjusted for 9.5 percent recovery works out to Rs.161 (160*9.5/9.44) and Rs.234
(232*9.5/9.44) per quintal. Table 5.2 presents the projected costs (A2, A2+FL and
C2) (both unadjusted and adjusted for recovery rate of 9.5 percent) and modified
cost C2 (including costs of transportation and insurance premium) of sugarcane for
2017-18 sugar season (crop year 2016-17) at all-India level (Also see Annex Table 5.3
and Annex Table 5.4).
Table 5.2: Projected Costs, Sugar Season 2017-18
(Rs/qtl)
Costs at State-specific Costs at 9.5 percent Cost of
recovery rates recovery rate Transportation Modified
S.No. State
and Insurance Cost#
A2 A2+FL C2 A2 A2+FL C2 Premium
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
1 AP 133 150 217 130 146 211 44 255
2 Kar 100 121 174 86 104 150 27 177
3 Mah 132 151 196 112 127 166 37 203
4 TN 147 174 210 155 184 222 37 259
5 UP 115 160 232 116 161 234 14 248
6 UK 86 117 177 88 121 182 12 194
All India 121 152 211 115 145 202 25 227
# Modified cost is total of projected cost C2 plus transportation and insurance premium.
Source: CACP Calculations.
5.8 Chart 5.5 depicts the projected cost of production (C2) by states as well as at all-
India level in ascending order of cost with their corresponding relative shares in
total production for sugarcane. It may be noted that all-India cost of production
(C2) for sugarcane for the 2017-18 sugar season, adjusted for 9.5 percent recovery,
is projected at Rs.202/qtl. The modified cost which includes transportation and
insurance charges is projected at Rs.227/qtl for the ensuing sugar season.
38 2 0 1 7 - 1 8 S U G A R S E A S O N
Chart 5.5: Supply Curve and Projected Cost, Sugar Season 2017-18
265
MSP Recommended = Rs.255/qtl
250
235
220 All India C2 Cost =Rs.211/qtl.

on (Rs. per quintal)
205
190

175
Cost of Productio
160
All India A2+FL Cost =Rs152/qtl.
145
130
All India A2 Cost = Rs.121/qtl.
115
100
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97
Production Shares (Percent)
Kar UK Mah
TN AP UP
All India A2 Rs.121/qtl. All India A2+FL Rs.152/qtl. All India C2 Rs.211/qtl.
MSP Recommended= Rs. 255/qtl.
Inter-Crop Price Parity

5.9 To appraise inter crop price parity, the Commission computes per hectare returns of
different crops that are substitutes for each other. Table 5.3 outlines relative returns
over A2, A2+FL and C2 in percent terms for sugarcane in reference to different crops.
It is observed that sugarcane is the most profitable crop vis-à-vis its competing crops
like wheat, paddy and cotton. Net returns as percent of cost C2 turns out to be 52
percent in sugarcane during 2012-13 to 2014-15 at all India level compared with
paddy (12 percent), cotton (15 percent) and wheat (27 percent). It needs to be kept
in mind that sugarcane cultivation is about 12 months’ crop duration compared to
about four to six months in cases of wheat or rice. Since sugarcane crop cycle on
an average is about three times that of wheat and paddy, the returns over A2+FL
and C2 have been normalized for time duration, i.e. returns per month have been
derived for these competing crops. It is observed that per hectare gross returns
for sugarcane at all-India level are generally higher or close to those of wheat and
paddy, even after adjusting for crop duration.

Table 5.3: Sugarcane Relative Returns (Percent)
(Average 2012-13 to 2014-15)
S. Crop Cost A2 Cost Cost C2 GVO Gross Returns Gross Returns over Net Returns Per Per Per
No. A2+FL over A2 A2+FL Month Month Month
Gross Gross Net
Rs./ha. Percent Rs./ha. Percent Rs./ha. Percent
Returns Returns Returns
(Col.6- (Col.7/ (Col.6- (Col.9/ (Col.6- (Col.11/
Rs./ha. over A2 over (Rs./
Col.3) Col.3* Col.4) Col.4 Col.5) Col.5
(Rs./ A2+FL ha.)
100) *100) *100)
ha.) (Rs./ha.)
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)
Sugarcane
1 All- 61985 76429 118746 180556 118571 191 104127 136 61810 52 9881 8677 5151
Price Parity
India
2 UP 36853 51150 90898 153014 116161 315 101864 199 62116 68 9680 8489 5176
3 Kar 54336 66616 109394 174732 120396 222 108117 162 65338 60 10033 9010 5445
4 Mah 111359 127264 176753 236205 124846 112 108940 86 59452 34 10404 9078 4954
Paddy
Price Parity
1 All- 25179 33631 47547 53242 28063 111 19611 58 5696 12 7016 4903 1424
India
2 Pun 30983 36013 62313 87006 56023 181 50993 142 24692 40 14006 12748 6173
3 Har 29633 37156 60828 91310 61677 208 54154 146 30482 50 15419 13538 7620
4 AP 36219 42466 66088 75060 38841 107 32594 77 8972 14 9710 8149 2243
and Inter-Crop
5 UP 21563 29522 43024 51255 29692 138 21733 74 8232 19 7423 5433 2058
6 Kar 36003 42183 60514 78069 42066 117 35886 85 17554 29 10516 8971 4389
Cotton
1 All- 37266 46208 64931 74519 37253 100 28311 61 9588 15 9313 7078 2397
India
and Inter-Crop
2 Guj 34929 44670 61160 80688 45759 131 36018 81 19527 32 11440 9005 4882
3 Mah 43583 51672 68740 71689 28106 64 20017 39 2949 4 7027 5004 737
Wheat
1 All- 22742 28879 45814 58340 35598 157 29461 102 12527 27 8900 7365 3132
India
2 Pun 25587 28184 52169 72748 47160 184 44564 158 20579 39 11790 11141 5145
3 Har 25364 33380 58462 74251 48887 193 40871 122 15789 27 12222 10218 3947
4 UP 24191 30338 46774 53370 29179 121 23032 76 6595 14 7295 5758 1649
Returns
5 Mah 28442 34677 46122 46814 18372 65 12137 35 692 2 4593 3034 173
Note: 1. Sugarcane as a whole is about 12- month duration and paddy as well as wheat are about 4- months’
duration.
2. For sugarcane and wheat, the average is for the years 2012-13 to 2014-15; for paddy and cotton the
average is for the years 2011-12 to 2013-14
Returns
Source: CACP Calculations

Costs, Costs,
Recapitulation
5.10 To sum up, the pricing policy is rooted not in the ‘cost plus’ approach, though cost
is one of its important determinants. The all-India weighted average projected cost
C2, adjusted at 9.5 per cent recovery for the 2017-18 sugar season is projected at
Rs. 202/qtl. The modified C2 cost inclusive of costs of transportation and insurance
charges for 2016-17 crop year (the 2017-18 sugar season), is projected at Rs. 227/qtl.
Given high share of labour at 33.4 percent in the total cost of production (C2) coupled
with growth in wage rates, it is imperative to go for farm mechanization on large
scale and improve productivity. This is all the more important as the cost of labour
in relation to the cost of capital is likely to increase in years to come. These projected
costs have been factored into formulation of price policy recommendations.
*****
40 2 0 1 7 - 1 8 S U G A R S E A S O N
Chapter 6
Considerations and Recommendations

for Price Policy
6.1 The price policy for sugarcane is formulated by the Commission within the scope of
its mandate and the terms of reference given to it under the Sugarcane (Control)
Order, 1966 issued under the EC Act, 1955. As per the provisions of Clause 3(1) of the
Sugarcane (Control) Order, 1966, “The Central Government may, after consultation
with the authorities, bodies or associations as it may deem fit by notification in the
Chapter 6
official Gazette, from time to time, fix the Fair and Remunerative Price of sugarcane
to be paid by producers of sugar or their agents for the sugarcane purchased by
them, having regard to:
a) the cost of production of sugarcane;
b) the return to the grower from alternative crops and the general trend of prices
of agricultural commodities;
c) the availability of sugar to the consumers at a fair price;
d) the price at which sugar produced from sugarcane is sold by producers of
sugar;
e) the 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 on 29.12.2008); and
g) reasonable margins for growers of sugarcane on account of risk and profits
(inserted on 22.10.2009).
The Commission, accordingly, considers all the above statutory factors listed in the
Control Order while recommending the FRP of sugarcane.

State Advised Price (SAP) and Cane Price Arrears
6.2 Some State governments, namely, Haryana, Punjab, Tamil Nadu, Uttar Pradesh and
Uttarakhand have been announcing their own State Advised Prices (SAPs) which are
not based on scientific basis and are usually higher than the FRP. This, in turn, has led
to mounting cane price arrears in recent past. The cane price arrears, which recorded
Considerations and Recommendations for Price Policy
a steep increase during 2009-10 to 2014-15, witnessed a declining trend in 2015-16

and were Rs. 7488 crore. The targeted policy interventions by the Government have
resulted in significant reduction in cane price arrears. However, permanent solution
needs to be evolved for such problems.
6.3 Uttar Pradesh (Rs.3043 crores) and Tamil Nadu (Rs.1030 crore) accounted for over
70 percent of total cane arrears in 2015-16. The cane price arrears for the other
states that pay SAP, are also relatively high. In Uttar Pradesh more than 55 percent
of the arrears during 2015-16 (Rs.1714 crore out of Rs.3043 crore) were on account
of SAP. Similarly, in case of Uttarakhand nearly two-third of arrears and in Tamil
Nadu more than 50 percent of the arrears were due to SAP. This clearly shows that
SAP is the main distorting factor in cane pricing resulting in huge cane arrears. In
addition, SAP does not incentivize efficiency in terms of better sugar recovery as SAP
is not linked to sugar recovery rate unlike FRP. In order to promote efficiency (better
sugar recovery) and remove distortions in cane pricing, the Commission strongly
recommends that the system of SAPs by State Governments should be stopped
and Revenue Sharing Formula (RSF) should be adopted as recommended by the
Rangarajan Committee on Regulation of Sugar Sector in India.
Sugarcane Pricing: Adoption of Hybrid Formula

6.4 Based on the Commission’s earlier in-depth analysis of the sugar recovery rate, cost
of sugarcane production by farmers and cost of converting cane into sugar and its
by-products, the farmers should get either 75 percent of the value of sugar (at 10.31
percent recovery rate) or 70 percent of the value of sugar and each of its three
major by-products, namely bagasse, molasses and press mud (all ex-mill). As regards
implementation, the actual payment for the cane dues under hybrid approach be paid
in two stages. In the first stage, farmers be paid a floor price (FRP) and the balance
payment in the second stage, after publication of quarterly ex-mill prices of sugar
to be brought out by the Directorate of Sugar (Mo CA, FPD). Since this approach is
based on revenue realization of the mill and revenue sharing with the farmers, there
is all probability that farmers will face uncertainty due to volatility in prices of sugar
and by-products. To ensure minimum price to the farmers during low prices of sugar,
farmers must be paid the FRP within the stipulated time period, even if the final
price determined by RSF is lower than FRP. For this purpose Sugar Price Stabilization
Fund (SPSF) under the Sugar Development Fund (SDF) should be created. In case,
sugar mills have not paid the FRP to farmers, payments can be transferred directly
42 2 0 1 7 - 1 8 S U G A R S E A S O N
to farmer’s bank account. However, in order to implement RSF, there is a need to
have effective and transparent method of collecting ex-mill prices of sugar and by-
products. Thus, this recommendation essentially has three components namely (i)
FRP, (ii) RSF and (iii) PSF/SDF and all these need to be implemented as an ‘atomic
whole’ for the viability and competitiveness of the sugar industry.

Monitoring of Ex-Mill Prices
6.5 There is a significant difference between wholesale and ex-Mill prices. The wholesale
prices are monitored by the Ministry of Consumer Affairs, Food and Public Distribution
(Mo CA, F&PD) and the Ministry of Agriculture. The Commission recommends that
Directorate of Sugar (Mo CA, F&PD) should regularly track state-wise ex-mill prices
of sugar and three primary by-products of cane and publish/upload on their website,
at least on quarterly basis (as currently there exists no authentic official source of
this data).
Sugar Development Fund (SDF)

6.6 Sugar Cess Act, 1982 has been amended as The Sugar Cess (Amendment) Act, 2015
pursuant to the need for enhancement of the accruals in the Sugar Development
Fund from cess on account of committed expenditure on various interventions
undertaken to facilitate liquidation of arrears of cane dues. The amended Act,
(ceiling of the cess has been raised from Rs. 25 to Rs. 200 per quintal) would lead to
increase in the accruals to the Sugar Development Fund which could also be used
in facilitating modernization and rehabilitation of potentially sick viable sugar mills,
along with meeting the committed expenditure, thereby helping cane growers.
6.7 Increased accruals in the SDF could also be used to create distillery and ethanol
capacity across the industry to ensure adequate supply to support 10 per cent
blending of automobile fuel with ethanol under Ethanol Blending Policy (EBP).
The Centre should support investments in the industry, which is yet to fully exploit
bagasse-fueled cogeneration of power. These measures will ensure a stable future
for the sugar industry by tapping the emerging and expanding scope of end use
of cane despite the cyclical nature of the crop. In addition, SDF should be used for
various activities related to cane development such as improved varieties, seed
nurseries, crop management including ratoon management, drip irrigation, farm
mechanization, etc.
De-reservation of Sugarcane Area and Removal of Minimum Distance

Criterion
6.8 The cane area reservation and the criterion for distance between mills were
introduced with noble objectives of ensuring adequate cane supply to mills and
preventing unhealthy competition for procurement of sugarcane, ensuring crushing

of the entire quantity of cane grown by farmers in the reserved area, and improving
crop productivity and sugar recovery through provision of better technology,
extension services and management practices to sugarcane farmers. However, in
the course of time, these two enactments have turned out as constraints on cane
growers in the form of restricting them to supply their cane to a particular mill even
if the mill had not undertaken any cane development activities and even not paid
the previous dues. Sometimes, farmers have to wait for long time to deliver their
cane to the sugar mills. Moreover, secured supplies of cane without any competition
by virtue of these enactments made the millers complacent and in the process some
of them have become inefficient. Lack of competition among sugar mills created
perpetual monopolies, which has resulted in delayed payments and unfair price to
the farmers under revenue sharing formula. In view of this, it becomes necessary
to provide freedom and more options to farmers to choose other efficient mills
for their cane delivery and thereby bringing more competition in the sector. The
Commission thus recommends that reservation of cane area and minimum distance
requirement should be removed.
Promoting Efficiency in Sugarcane and Sugar Production

6.9 Recovery rate of sugar mainly depends on sucrose content in sugarcane, conditions
of plant and machinery, cane supply arrangements in the State and agro-climatic
conditions in the region. Except the agro-climatic conditions, which is a natural factor,
the other factors can be influenced by taking appropriate initiatives to improve
recovery rate. In this regard, the Government has extended large assistance from
Sugar Development Fund (SDF) for modernization of plant and machinery of sugar
mills and also for cane development which could be utilized in augmenting all-India
average recovery rate, which is hovering around 10 percent.
Sucrose Content and Recovery Rate of Sugarcane

6.10 For improving quality of sugarcane under cane development, the research institutions
should develop sucrose-rich, less water-intensive and pest and disease resistant
varieties. Considerable difference in the yield rates at demonstration plots and at
farmers’ field reveals inefficient input use, poor management practices and lack
of effective extension services at farm level. The farmers need to be incentivized
to grow sucrose-rich early high-yielding varieties, which will help in reducing cost
of production, higher productivity and improved profitability. It is encouraging to
observe that recovery of sugar has improved significantly in Haryana, Punjab, Gujarat
and Uttar Pradesh during last few years due to adoption of early and improved
varieties of sugarcane and better management.
6.11 One of the factors that helps in high sugar recovery rate in Maharashtra, Gujarat
and North Karnataka is that sugar mills make arrangements for harvesting and
transporting cane from fields to the mills, which results in timely crushing of
44 2 0 1 7 - 1 8 S U G A R S E A S O N
cane. On the other hand, in the northern States farmers arrange harvesting and
transportation of cane at their own, which sometimes leads to delay in crushing
and low recovery. If mills undertake harvesting and transportation of cane as is
done in Maharashtra and Gujarat, recovery rate may go up by 0.5 to 1 percent. The
Commission is of the considered view that the Government may encourage the
sugar mills and the State Governments to facilitate harvesting and transportation

of cane by mills.

6.12 Given the high share of labour, about one-third in the total cost of production (C2)
of sugarcane, coupled with rapid rise in wage rates, it is imperative to promote
mechanization of cane farming from planting to harvesting. The Commission in
its interaction with sugarcane farmers in Uttar Pradesh observed that famers have
started using sugarcane planters which have resulted in lower input costs and higher
productivity. However, there are no viable and feasible solutions of mechanized
sugarcane harvesting available to farmers. Therefore, cconcerted efforts are required
to formulate a comprehensive strategy for mechanising sugarcane cultivation in
India. The Commission recommends that a consortium of institutions such as the
ICAR-Indian Institute of Sugarcane Research (IISR), Central Institute of Agricultural
Engineering (CIAE), IITs, etc. takes an initiative to develop suitable and affordable
sugarcane harvester and other machinery.
Increasing Productivity and Profitability

6.13 To improve sugarcane productivity and address the inter-state differences in
productivity various public and private organizations including Krishi Vigyan Kendras
(KVKs) should accelerate dissemination and demonstration of modern scientific
cultivation practices, better crop management, use of bio-control agents and farm
mechanization. Despite being the largest producer of sugarcane in the country, cane
productivity in Uttar Pradesh is 62.1 t/ha, which is lower than all-India average of
71.5 t/ha, hence there is a need for increasing productivity in the state. There are
large interstate variations in sugar recovery and capacity utilization of sugar mills.
Sugar Mills should operate efficiently at full capacity level without the constraint of
inadequate availability of sugarcane for crushing. Therefore, efforts should be made
to enhance the productivity in the states like Uttar Pradesh and popularize varieties
with higher sugar recovery.
6.14 Intercropping of pulses, oilseeds, cereals and vegetables with sugarcane will help
in improving profitability and also improving soil health. Therefore, special efforts
are needed to promote, and incentivize sugarcane based intercropping systems
involving pulses, oilseeds, cereals and vegetables.

Transparency in Weighing of Sugarcane
6.15 Lack of trust and transparency in weighing of sugarcane was raised by farmers/
farmers’ representatives during the stakeholder discussions. As recommended in
the earlier reports, the Commission reiterates that Government should persuade
the state governments/Cane Commissioners and sugar mills to make adequate
arrangements for electronic weigh bridges/machines, which measure and display

the actual weights so as to improve trust and transparency between these two
stakeholders.
Improve Water Use Efficiency and Sustainability of Sugarcane Production

6.16 Sugarcane is a water intensive crop, and with water becoming increasingly scarce
(given that Maharashtra and Karnataka experienced severe droughts in the last
two years), it is advisable that cane productivity needs to be optimized not only
per unit of land, but also per unit of water. Against this backdrop, the Commission
recommends taking up drip irrigation in sugarcane on a much higher priority
particularly in drought prone areas of Maharashtra and Karnataka. The Commission
recommends that in addition to subsidy available under “Per Drop More Crop”
component of Prime Minister Krishi Sinchayee Yojana (PMKSY), sugar mills should
be encouraged to provide additional assistance to farmers for installation of drip
irrigation in sugarcane. During meetings with farmers, it was observed that some
farmers were not aware of subsidy schemes, therefore, wide publicity should be
given to such schemes by the State Governments and sugar mills to create awareness
and promote adoption of water-saving technologies by farmers.
Product Diversification for Financial Health of Sugar Mills
6.17 Sugar mills should become energy complexes and produce not only sugar but also
alcohol, ethanol, power and other downstream products. Setting up these facilities
by sugar mills, would make them energy hubs of the country and enable them to pay
remunerative price to cane growers. To tap the potential and achieve the target of
Ethanol Blending Policy (EBP) and co-generation, sugar industry needs to upgrade its
technologies and create capacities for cogeneration and ethanol production. For this
purpose, the Central Government can prepare a concrete action plan, in consultation
with State Governments, concerned Departments of Central Government and apex
organizations of sugar industry, to turn sugar mills into integrated energy complexes
in a time bound manner.
6.18 In Uttar Pradesh, about 25 percent of molasses are reserved for potable liquor
and the price paid is less than one-fourth of the market price being offered by the
chemical industry. Such perverse policies need to be fully overhauled. However, two
issues will remain central to sugar sector’s future growth: (a) How best one can align
46 2 0 1 7 - 1 8 S U G A R S E A S O N
sugarcane production with better and more efficient usage of water; and (b) how
rationally we can align sugarcane pricing with revenue sharing formula.
Cost of Production and FRP of Sugarcane

6.19 The all-India weighted average projected cost C2, adjusted at 9.5 percent recovery for

the 2017-18 sugar season is projected at Rs 202/qtl. The modified C2 cost inclusive of
costs of transportation and insurance premium of sugarcane for the 2017-18 sugar
season is projected at Rs. 227/qtl. After analyzing and taking into consideration
the relevant factors, the Commission recommends that FRP of sugarcane for
2017-18 sugar season be fixed at Rs. 255/qtl. linked to basic recovery of 9.5
percent. For each 0.1 percentage point increase in recovery rate over and above
9.5 percent, the FRP would be increased by Rs. 2.68 per quintal. All India average
recovery rate being 10.60 percent during 2015-16, the FRP recommended works
out to Rs. 284.48/qtl. The Commission feels that these considerations and price
policy recommendations when implemented would incentivize sugarcane farmers
and help them to get remunerative prices and higher farm income.
(Vijay Paul Sharma)

Chairman
(Suresh Pal) (Shailja Sharma)

Member (Official) Member Secretary
16th August, 2016

Annex Tables
48 2 0 1 7 - 1 8 S U G A R S E A S O N
Annex Table S.1: FRP Recommended and its Linking with RR, Sugar Season 2017-18
(Rs./qtl)
Basic Recovery FRP linked with Basic Recovery FRP linked with
Rate RR Rate RR
9.5 255.00 11.6 311.28
9.6 257.68 11.7 313.96
9.7 260.36 11.8 316.64
9.8 263.04 11.9 319.32
9.9 265.72 12.0 322.00
10.0 268.40 12.1 324.68
10.1 271.08 12.2 327.36
10.2 273.76 12.3 330.04
10.3 276.44 12.4 332.72
10.4 279.12 12.5 335.40
10.5 281.80 12.6 338.08
10.6 284.48 12.7 340.76
10.7 287.16 12.8 343.44
10.8 289.84 12.9 346.12
10.9 292.52 13.0 348.80
11.0 295.20 13.1 351.48
11.1 297.88 13.2 354.16
11.2 300.56 13.3 356.84
11.3 303.24 13.4 359.52
11.4 305.92 13.5 362.20
11.5 308.60
RR: Recovery Rate

Annex Table 1.1: Sugarcane: Area, Production and Yield
( ‘ooo hectares, ‘ooo tonnes, Kg. per hectare)
State 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16*
Sub-Tropical Region
Area 2736 2662 2474 2323 2635 2663 2756 2781 2688 2697.6
Production 161605 151756 129398 137050 150018 159031 165310 167684 167469 179123
Yield 59064 57017 52305 58999 56939 59712 59977 60289 62306 66400.9
Bihar
Area 130 109 112 116 248 218 250 258 254 248.6
Production 5956 3855 4960 5033 12764 11289 12741 12882 14034 14676
Yield 45953 35496 44324 43422 51466 51714 50896 49916 55179 59034.6
Haryana
Area 140 140 90 74 85 95 101 102 97 93
Production 9580 8860 5130 5335 6042 6959 7437 7499 7169 6510
Yield 68429 63286 57000 72095 71082 73253 73634 73520 73907 70000
Punjab
Area 99 110 81 60 70 80 83 89 94 90
Production 6020 6690 4670 3700 4170 5653 5919 6675 7039 6576
Yield 60808 60818 57654 61667 59571 70663 71313 75000 74883 73066.7
Uttarakhand
Area 121 124 107 96 107 108 110 104 102 97
Production 6100 7686 5590 5842 6498 6311 6785 5940 6165 5976
Yield 50413 61984 52243 60854 60896 58435 61736 56971 60608 61608.2
Uttar Pradesh
Area 2247 2179 2084 1977 2125 2162 2212 2228 2141 2169
Production 133949 124665 109048 117140 120545 128819 132428 134689 133061 145385
Yield 59626 57212 52326 59251 56727 59583 59868 60453 62155 67028.6
Tropical Region
Area 2244 2211 1775 1698 2086 2204 2077 2036 2158 2034.3
Production 185684 188234 147670 148456 184529 193553 167556 175195 184228 161914
Yield 82739 85128 83199 87419 88460 87803 80664 86034 85367 79592.2
Andhra Pradesh
Area 264 247 196 158 192 204 196 192 139 122
Production 21692 20296 15380 11708 14964 16686 15567 15385 9987 9312
Yield 82167 82170 78469 74101 77938 81794 79423 80130 71849 76327.9
Telangana
Area 38 35
Production 3343 2415
Yield 87974 69000
(Contd..)
50 2 0 1 7 - 1 8 S U G A R S E A S O N
Annex Table 1.1: Sugarcane: Area, Production and Yield
( ‘ooo hectares, ‘ooo tonnes, Kg. per hectare)
State 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16*
Gujarat
Area 214 211 221 154 190 202 176 174 208 183
Production 15630 15190 15510 12400 13760 12750 12690 12550 14330 12960
Yield 73037 71991 70181 80519 72421 63119 72102 72126 68894 70819.7
Karnataka
Area 326 306 281 337 423 430 425 420 480 450
Production 28670 26240 23328 30443 39657 38808 35732 37905 43776 38475
Yield 87944 85752 83018 90335 93752 90251 84075 90250 91200 85500
Maharashtra
Area 1049 1093 768 756 965 1022 933 937 1030 987
Production 78568 88437 60648 64159 81896 86733 69648 76901 84699 72255
Yield 74898 80912 78969 84866 84866 84866 74650 82072 82232 73206.7
Tamil Nadu
Area 391 354 309 293 316 346 347 313 263 257.3
Production 41124 38071 32804 29746 34252 38576 33919 32454 28093 26497.4
Yield 105123 107484 106197 101452 108392 111362 97688 103575 106788 102983
All India
Area 5151 5055 4415 4175 4885 5038 4999 4993 5067 4953.4
Production 355520 348188 285029 292302 342382 361037 341200 352142 362333 352163
Yield 69022 68877 64553 70020 70091 71667 68254 70522 71512 71095.2
* : Fourth Advance Estimates
Source: DES, Ministry of Agriculture
(Concluded)

Annex Table 1.2: State-wise Production of Sugar
(lakh tonnes)
State 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16P
Sub-Tropical Region 105.9 91.9 50.7 61.5 71.5 86.2 93.0 85.2 91.0 87.5
Bihar 4.8 3.4 2.2 2.6 3.9 4.5 5.1 6.0 5.3 5.0
Haryana 6.8 6.0 2.3 2.5 3.9 4.9 5.1 5.4 5.7 5.4
52 2 0 1 7 - 1 8 S U G A R S E A S O N
Punjab 5.5 5.3 2.4 1.8 3.0 3.9 4.4 4.7 5.4 6.7
Uttarakhand 5.3 4.0 2.2 2.9 3.1 3.3 3.4 3.0 3.3 2.7
Uttar Pradesh 83.5 73.2 41.5 51.7 57.6 69.6 75.0 66.1 71.4 67.8
Tropical Region 172.9 167.6 94.8 125.2 168.3 173.8 154.8 154.8 187.9 155.4
Andhra Pradesh 6.8 5.7 5.5

Telangana 3.3 3.2 2.8
Andhra Pd+Telangana 19.2 13.4 5.9 5.1 10.1 11.4 9.8 10.1 8.9 8.3
Gujarat 13.9 13.7 10.2 11.9 12.7 10.0 11.3 11.8 11.5 11.1
Karnataka 25.4 28.4 16.8 25.1 36.4 38.7 34.4 41.6 49.9 40.0
Maharashtra 90.1 90.8 46.0 70.4 90.7 90.0 79.9 77.2 105.2 86.1
Tamil Nadu 24.2 21.4 16.0 12.7 18.4 23.8 19.3 14.2 12.6 10.0
Others 3.2 3.5 1.2 1.4 3.8 3.5 4.1 5.5 5.7 4.3
All India 282.0 263.0 146.8 188.0 243.5 263.4 251.8 245.5 284.6 247.2
P : Provisional
Annex Table 1.3: Average Recovery of Sugar from Sugarcane (Oct.-Sept.)
(Percent)
State 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15P 2015-16P
Andhra Pradesh 9.7 10.1 9.9 9.3 9.8 9.8 9.7 10.0 9.7 9.3
Bihar 8.7 9.2 9.3 9.5 9.3 9.1 8.9 9.1 9.1 9.7
Gujarat 10.7 10.9 9.5 10.5 10.0 10.6 10.8 11.2 10.5 10.4
Haryana 9.7 9.9 9.1 9.4 9.0 9.1 9.8 9.4 9.9 9.4
Karnataka 10.7 10.1 10.3 10.7 10.9 11.2 10.4 11.0 10.9 10.8
Maharashtra 11.4 11.8 11.5 11.5 11.3 11.7 11.5 11.5 11.7 11.4
Punjab 9.5 9.3 9.3 8.6 8.8 9.1 9.1 9.3 9.4 10.0
Tamil Nadu 9.3 9.3 9.6 8.9 9.1 9.4 8.9 9.0 8.1 8.8
Telangana 10.5 10.8
Uttar Pradesh 9.5 9.3 8.9 9.1 9.2 9.1 9.2 9.3 9.5 10.6
Uttarakhand 9.5 9.8 9.2 9.2 9.3 9.1 9.2 9.0 9.2 9.5
All India 10.2 10.3 10.1 10.2 10.2 10.3 10.0 10.3 10.4 10.6
P : Provisional
2017-18 SUGAR SEASON

53
Annex Table 1.4a: State-wise Policy on Molasses
(as on 15th July, 2016)
State Policy
Andhra Pradesh No reservation for any sector. Exports outside the state not allowed
Total Molasses produced in the state w.e.f. 01.04.2016 shall be utilised to manufacture
Bihar
ethanol which shall be blended with petrol by the OMCs
50% of total production is reserved for use within the state and the balance can be exported
Gujarat
out-side the state after obtaining the requisite permission fom the Excise Department
Haryana No restriction or control either on use or on movement of molasses
Karnataka Has no restriction or control either on use or on movement of molasses
Maharashtra No reservation for any sector. Usage decided on case to case basis
Punjab No restriction or control either on use or on movement of molasses
Other use of molasses except manufacture of potable liquor is not permitted. However, during
the sugar year 2012-13, the state Government had granted permission for manufacture of
Tamil Nadu
ethanol for blending with petrol, which has again been discontinued. Export of molasses
outside the state is not allowed
10% of molasses produced is reserved for country liquor and 20% is reserved for export to
Uttarakhand
other states. Balance 70% is un-reserved and can be utilised for any purpose
25% of molasses produced is reserved for use by potable liquor sector. The dispatches are
Uttar Pradesh
allowed in the ratio of 1:3 for reserved and free sale molasses
Note: 1. Molasses across the country was controlled by the Union Government under the Molasses Control Order, 1961.
2. Union Government with effect from 10th June, 1993 repealed the Molasses Control Order. Now some states are controlling
molasses through their legislations.
3. Permission for inter-state movement of molasses has to be obtained from the State Excise Department in all the states.
54 2 0 1 7 - 1 8 S U G A R S E A S O N
Annex Table 1.4b: State-wise Duties/Levies Imposed on Ethanol
(Rs/litre)
State Export Duty Import Duty Vat on Intra-State Others

Movement (%) Rate Details
Andhra Pd. 5.50
Bihar 5.00
Delhi 2.00
Gujarat 3.00
Haryana 1.00 1.00 Permit Fee
Jharkhand 1.00
Karnataka 5.50
Kerala 0.56
Madhya Pd. 1.50 1.00 5.00 0.30 Transport Fee
1% Entry Fee
Punjab 2.00
Rajasthan 1.00
Tamil Nadu 8.00 0.50 Administrative
Charges on Intra
State
Uttarakhand 1.10
Uttar Pd. 1.00 0.95 Purchase Tax @
0.80 - License
Fee @ 0.15
on Intra State
West Bengal 0.25

Annex Table 2.1: Cane Price Payable to Farmers as a Percentage of Value of Sugar
Sugar Ex-Mill Cane State Total Sugar Value from 1 Farmers share in total revenue Cane price
Season Sugar price Recovery qtl. of cane (Rs/qtl) (Cane price paid to farmers/ payable to
Prices (Rs/ paid to Rate (%) total sugar value)*100 farmers under
qtl) farmers revenue sharing
(SAP) formula (75% of
(Rs/qtl) total sugar value
from 1 qtl. of
cane)
At State At 9.5% At State At 9.5% At 9.5% Recovery
Recovery Recovery Recovery Rate Recovery Rate Rate
Rate Rate
(1) (2) (3) (4) (5)=(2)*(4) (6)=(2)*9.5 (7)=(3)*100/(5) (8)=(3)*100/ (9)=0.75*(6)
(6)
Maharashtra
2010-11 2592.96 11.30 293.00 246.33 184.75
2011-12 2859.79 11.67 333.74 271.68 203.76
2012-13 2988.75 220.00 11.45 342.21 283.93 64.29 77.48 212.95
2013-14 2759.58 11.47 316.52 262.16 196.62
2014-15 2340.21 245.00 11.67 273.10 222.32 89.71 110.20 166.74
2015-16 2950.28 171.00 11.37 335.45 280.28 50.98 61.01 210.21
Average 68.32 82.90
Punjab
2010-11 2657.71 195.00 8.80 233.88 252.48 83.38 77.23 189.36
2011-12 3949.88 225.00 9.12 360.23 375.24 62.46 59.96 281.43
2012-13 3137.71 240.00 9.09 285.22 298.08 84.15 80.51 223.56
2013-14 3036.67 280.00 9.28 281.80 288.48 99.36 97.06 216.36
2014-15 2575.42 285.00 9.37 241.32 244.66 118.10 116.49 183.50
2015-16 3065.28 285.00 10.01 306.83 291.20 92.88 97.87 218.40
Average 90.05 88.19
Tamil Nadu
2010-11 2647.29 190.00 9.10 240.90 251.49 78.87 75.55 188.62
2011-12 2891.25 210.00 9.35 270.33 274.67 77.68 76.46 206.00
2012-13 3046.46 235.00 8.88 270.53 289.41 86.87 81.20 217.06
2013-14 2874.38 265.00 8.96 257.54 273.07 102.90 97.05 204.80
2014-15 2454.17 265.00 8.10 198.79 233.15 133.31 113.66 174.86
2015-16 3097.50 285.00 8.84 273.82 294.26 104.08 96.85 220.70
Average 97.28 90.13
Source: Calculated by the Commission based on data from Directorate of Sugar, DFPD
56 2 0 1 7 - 1 8 S U G A R S E A S O N
Annex Table 2.2: State-wise Comparison of SAP and FRP
Sugar Season
State
2013-14 2014-15 2015-16
Rs.240 to Rs.260 per quintal The sugar factories are paying over & Sugar mills are paying FRP with
for Private mills and Rs.216 above ranging from Rs.226 to Rs.256 per incentives which differ from
per quintal for cooperative quintal. (FRP & purchase tax incentive factory to factory in the range
Andhra Pradesh mills. This includes Rs. 6 per of Rs.6 per quintal (purchase tax to be of Rs.230/- to Rs.264.20 per
quintal to be paid by State remitted by the sugar factories to the quintal
Govt. Govt is being passed on to the cane
suppliers).
Rs.245 per quintal (Un- Rs.250 per quintal (Un-recommended Rs.250 per quintal (Un-
recommended varieties) varieties)^ recommended varieties)
Rs.255 per quintal (Central Rs.260 per quintal (Central Varieties)^ Rs.260 per quintal (Central
Bihar Varieties) Varieties)
Rs.265 per quintal (Early Rs.270 per quintal (Early Varieties)^ Rs.270 per quintal (Early
Varieties) Varieties)
Sugar mills to pay FRP or more Sugar mills to pay FRP or more based on Sugar mills to pay FRP or more
Gujarat based on profit sharing profit sharing based on profit sharing
Rs.301 per quintal (Early Rs.310 per quintal (Early Varieties) Rs.310 per quintal (Early
Rs.290 per quintal (Mid Rs.305 per quintal (Mid Varieties) Rs.305 per quintal (Mid
Haryana Varieties) Varieties)
Rs.285 per quintal (Normal Rs.300 per quintal (Normal Varieties) Rs.300 per quintal (Normal
South Karnataka Rs.250 State Govt. initially fixed cane price mill- FRP is the price to be paid by
per quintal Ex-Gate. North wise, ranging from Rs.220 per quintal the sugar mills. Ist instalment
Karnataka Rs.250 per quintal upto 9.5% recovery to Rs.291 per quintal Rs.220/- to Rs.250/- per quintal
Karnataka Ex-field. Additional Rs. 15 per at 12.56 % recovery including harvesting & transport
quintal will be paid by state charges of Rs.50/- per quintal.
Govt. to the cane farmers.
Sugar mills pay mutually Sugar mills in the State paying FRP 80% of FRP as Ist Instalment.
agreed price with farmers of based on their recovery % of last season IInd instalment /balance of FRP
their area; final payable price ranging from Rs.220 to Rs.370 per quintal is to be paid after closure of
Maharashtra not yet decided including Rs.50 per quintal transport & season. Highest Rs.214.50/-per
harvesting charges quintal doodganga and lowest
Rs.127.50 per quintal purti S.S.K.
Rs.290 per quintal (Early Rs.295 per quintal (Early Varieties) Rs.295 per quintal (Early
Rs.280 per quintal (Mid Rs.285 per quintal (Mid Varieties) Rs.285 per quintal (Mid
Punjab Varieties) Varieties)
Rs.275 per quintal (Normal Rs.280 per quintal (Normal Varieties) Rs.280 per quintal (Normal
Rs.265 per quintal linked to Rs.265 per quintal linked to 9.5% with Rs.285 per quintal linked to
9.5% with increase of Rs.2.21 increase of Rs.2.21 for every 0.1% 9.5% with increase of Rs.2.42
for every 0.1% point increase point increase in recovery above 9.5%. for every 0.1% point increase in
Tamil Nadu
in recovery above 9.5%. (includes Rs.10 per quintal transport) recovery above 9.5%. (includes
(includes Rs.10 per quintal Rs.10 per quintal transport)
transport)
(Contd..)

Annex Table 2.2: State-wise Comparison of SAP and FRP
State Sugar Season
2013-14 2014-15 2015-16
- Farmers are getting cane price ranging All 7 sugar mills are paying same price
from Rs.226 to Rs.265 per quintal based on G.O.I notification ranging
Telengana from Rs.237.50 to Rs.270.0 per quintal.
Rs.295 per quintal Rs.290 per quintal (Early Varieties) Rs.290 per quintal (Early Varieties)
(Early Varieties)
Uttarakhand
Rs.285 per quintal Rs.280 per quintal (General Varieties) Rs.280 per quintal (General Varieties)
(General Varieties)
Rs.290 per quintal Rs.290 per quintal (Early Varieties)* Rs.290 per quintal (Early Varieties)*
(Early Varieties)*
Rs.280 per quintal Rs.280 per quintal (Normal Varieties)* Rs.280 per quintal (Normal Varieties)*
Uttar Pradesh (Normal Varieties)*
Rs.275 per quintal Rs.275 per quintal (Rejected Varieties)* Rs.275 per quintal (Rejected Varieties)*
(Rejected Varieties)*
Basic FRP at 9.5 % Basic FRP at 9.5 % recovery Rs.220 Basic FRP at 9.5 % recovery Rs.230
recovery Rs.210 per per quintal with additional increase of per quintal with additional increase of
quintal with additional Rs.2.32 for every 0.1% point increase in Rs.2.42 for every 0.1% point increase in
FRP increase of Rs.2.21 the basic recovery % the basic recovery %
for every 0.1% point
increase in the basic
recovery %
Note :- ^ : Bihar - Includes Rs.5 per quintal as bonus to be paid by State Govt.
* : UP - M
ill will pay Rs.240/- per qtl. as 1st installment to the farmers & 2nd installment of Rs. 40/- per qtl. will be paid within three
months from the closure of the crushing season.
(Concluded)
58 2 0 1 7 - 1 8 S U G A R S E A S O N
Annex Table 3.1: Benchmarking Sugarcane Productivity and Efficiency Gaps
All-India Average Yield TE2015-16 (t/ha) 71.5
TN (104.5, 8.4%), Karnataka (89, 11.7%), MH (79.7, 23%), AP (76.1,

Benchmarking States TE2015-16
3.4%), UP (62.1, 41.4%), Bihar (53.6, 4.1%), Gujarat (70.6, 3.9%)
Guatemala (99, 1.3%), Colombia (88.2, 1.8%), Australia (80.2,

Benchmarking Countries TE2014 1.4%), USA (78.4. 1.4%), Thailand (76.4, 5%), Mexico (74, 2.8%),
Brazil (73.4, 37.1%), India (69.5, 17.5%)
Efficiency Gap in India’s Yield Level w.r.t

29.7
Benchmark Country (%)
Efficiency Gap in India’s Yield Level w.r.t

31.6
Benchmark State (%)
Note: 1. Above figures are based on TE 2014/ TE 2015-16
2. Figures in parentheses indicate yield (t/ha) and share of production (%) respectively.
3. Countries and States with less than 1% share in total production have not been considered.
Source: Collated from FAO and DES

Annex Table 5.1: Month-wise and State-wise Average Wage Rates for Agricultural Labour (Man)
(Rs./day)
Month/Year AP ASS BH GJ HR HP KRN KER MP MH ODI Punjab RAJ TN UP WB All
India
January, 2012 177 127 113 113 205 237 137 392 99 153 135 219 162 209 126 142 148
February 203 131 124 115 212 241 145 420 100 153 140 235 172 231 136 151 157
60 2 0 1 7 - 1 8 S U G A R S E A S O N
March 195 132 126 116 213 241 147 413 106 156 140 233 198 226 135 152 161
April 207 132 127 117 210 241 146 417 110 156 145 256 194 231 136 159 164
May 198 134 129 118 210 241 148 417 108 154 148 243 202 232 138 161 164
June 185 134 134 118 215 246 156 420 113 165 137 223 204 238 138 160 165
July 191 138 138 125 219 270 163 453 116 171 140 246 223 244 146 169 174
August 193 138 143 126 229 246 168 453 119 170 152 241 213 253 149 167 175
September 205 140 144 126 229 246 170 455 121 173 143 240 214 252 153 165 177
October 199 145 147 126 238 246 173 461 119 174 135 278 216 251 156 165 179
November 210 148 148 126 233 251 178 461 120 173 137 274 217 246 158 171 180
December 224 145 151 127 228 260 177 461 120 182 138 273 221 247 160 173 184
January, 2013 224 146 162 130 246 273 184 465 126 186 136 257 219 253 163 178 187
February 228 157 164 130 245 259 188 465 126 192 134 260 204 259 165 180 187
March 221 154 166 133 245 259 189 461 130 194 136 260 208 265 166 181 189
April 230 153 167 130 247 264 192 478 135 195 137 284 217 265 168 182 193
May 223 150 167 131 245 266 192 489 138 197 141 273 244 266 169 185 197
June 222 162 168 132 244 262 196 483 134 189 143 290 235 271 173 185 196
July 221 178 175 136 258 263 203 485 132 201 150 291 220 272 174 198 198
August 210 183 177 137 317 284 210 487 133 200 157 279 215 275 181 200 199
September 213 178 176 138 312 290 212 490 138 196 150 219 284 181 200 192
October 212 175 175 139 312 298 213 487 144 199 156 283 229 294 180 199 203
November 247 184 205 142 328 337 235 585 140 221 196 248 330 192 224 214
December 242 181 191 165 325 356 228 580 151 216 179 278 247 352 186 229 222
(Continued)
Annex Table 5.1: Month-wise and State-wise Average Wage Rates for Agricultural Labour (Man)
(Rs./day)
Month/Year AP ASS BH GJ HR HP KRN KER MP MH ODI Punjab RAJ TN UP WB All India
January, 2014 229 182 194 172 320 336 237 580 155 215 178 276 262 355 191 229 225
February 226 188 200 172 329 336 240 629 158 214 180 275 251 362 191 230 226
March 222 189 202 175 333 341 243 594 161 219 164 279 270 356 195 223 229
April 222 199 204 179 335 352 240 594 163 223 160 306 291 361 201 226 235
May 225 203 206 179 346 335 242 594 165 223 173 307 283 364 202 225 235
June 217 204 207 179 347 341 241 594 164 230 191 304 280 362 199 227 235
July 230 208 218 185 345 345 241 599 173 225 201 302 320 372 200 226 244
August 226 220 220 190 348 343 241 599 173 226 208 304 305 371 202 230 243
September 239 225 220 190 350 343 242 586 180 222 204 310 296 417 198 234 246
October 241 226 222 198 354 339 242 586 171 222 202 310 297 412 201 237 246
November 247 238 220 198 357 330 244 597 170 223 200 312 305 421 199 236 248
December 236 234 220 192 344 349 252 604 176 222 194 307 307 417 199 237 247
January, 2015 246 235 219 194 338 363 254 643 178 225 201 286 298 430 200 241 249
February 250 234 221 194 335 363 252 643 179 225 202 290 287 440 202 241 249
March 245 226 228 194 341 363 253 642 179 226 202 281 284 429 205 242 248
April 245 225 230 195 340 363 253 652 182 231 201 277 291 403 209 242 249
May 235 231 231 196 345 362 260 652 183 232 200 292 279 405 208 242 249
June 239 239 237 196 346 351 260 664 188 228 203 311 282 399 207 240 250
July 229 236 242 203 350 361 269 664 186 234 206 311 295 393 211 240 253
August 241 238 246 203 355 366 277 653 188 233 202 304 300 404 214 239 257
September 241 239 246 203 354 372 278 656 190 228 196 303 304 394 214 241 256
October 240 236 244 203 354 367 279 656 189 233 200 298 298 392 215 237 256
November 276 243 243 203 351 374 285 657 182 228 204 301 303 382 216 237 259
December 278 241 245 203 361 379 286 657 180 229 200 301 302 383 219 248 260
January, 2016 276 235 248 206 354 371 285 664 183 231 199 288 276 381 218 251 256
February 254 233 248 206 359 371 281 666 182 229 195 300 270 383 217 252 253
March 250 234 246 213 359 371 280 670 186 231 206 292 277 406 217 254 256
April 272 240 246 214 362 395 278 670 188 232 198 310 260 406 223 254 257
May 259 236 246 211 360 379 283 665 186 247 199 312 266 400 223 256 258
Note: Daily Wage Rate - Average of Five Operations i.e. Ploughing, Sowing, Weeding, Transplanting and Harvesting
Source: Labour Bureau, Ministry of Labour, Govt. of India
(Concluded)

61
Annex Table 5.2: Farm Inputs- Wholesale Price Index (Base 2004-05=100)
Month/Year Fertilisers Electricity Pesticides Non-Electrical Tractors Lubricants High Speed Fodder Cattle
(Irrigation) Machinery Diesel Feed
(HSD)
Annual Average (July - June)
2012-13 151.1 170.9 122.2 123.0 142.7 248.3 192.7 237.8 220.0
2013-14 153.0 206.4 128.4 124.4 147.3 262.1 224.9 281.6 248.7
2014-15 155.6 214.1 136.6 127.5 152.3 275.2 216.6 297.9 261.5
2015-16* 158.7 233.1 138.4 127.7 153.3 277.5 183.0 321.9 271.4
2012
62 2 0 1 7 - 1 8 S U G A R S E A S O N
January 139.5 135.7 115.9 123.6 137.9 236.6 167.8 198.5 187.3
February 140.1 135.7 115.9 124.0 138.0 236.6 167.8 197.4 191.8
March 141.1 135.7 116.2 122.8 138.4 236.6 167.8 202.2 197.3
April 142.3 135.7 118.9 122.1 138.3 236.6 167.8 205.7 195.4
May 142.4 135.7 118.7 122.6 138.3 236.6 167.8 203.4 195.6
June 144.3 166.3 117.9 122.6 140.7 241.4 167.8 196.0 199.7
July 148.3 166.3 120.4 122.7 140.7 241.4 167.8 208.4 199.7
August 149.1 166.3 121.0 122.9 140.9 241.4 168.6 217.8 199.7
September 150.5 166.3 122.1 122.9 141.2 241.4 182.8 228.1 201.8
October 150.7 166.3 122.1 123.0 141.5 241.4 192.3 236.1 209.3
November 151.0 166.3 122.1 123.1 142.4 241.4 192.3 239.6 214.3
December 152.1 166.3 122.3 123.0 143.7 253.3 192.3 237.5 225.2
2013
January 152.6 166.3 123.0 123.0 143.7 253.3 198.8 241.9 225.2
February 152.5 166.3 122.9 123.5 143.7 253.3 202.7 246.2 231.1
March 152.3 166.3 122.5 123.1 143.7 253.3 201.7 250.4 232.2
April 152.4 184.8 122.0 123.0 143.7 253.3 202.3 246.0 233.8
May 151.5 184.8 123.0 122.9 143.7 253.3 203.4 244.2 233.3
June 150.5 184.8 123.5 122.9 143.7 253.3 207.0 257.1 234.1
July 151.5 184.8 123.6 123.1 143.7 253.3 212.0 265.3 238.2
August 152.0 203.0 124.5 123.8 143.8 253.3 215.4 267.6 237.7
September 152.4 206.9 125.7 123.9 144.3 263.9 219.8 270.1 238.8
October 152.7 209.1 127.7 124.1 144.7 263.9 220.4 270.7 238.4
November 152.8 209.1 127.9 124.1 144.7 263.9 222.4 274.1 239.0
December 152.6 205.5 127.5 124.3 145.0 263.9 225.0 278.3 246.6
(Continued)
Annex Table 5.2: Farm Inputs- Wholesale Price Index (Base 2004-05=100)
Month/Year Fertilisers Electricity Pesticides Non-Electrical Tractors Lubricants High Speed Fodder Cattle
(Irrigation) Machinery Diesel (HSD) Feed
2014
January 153.0 205.5 127.2 124.3 149.0 263.9 226.6 285.5 244.9
February 152.9 205.5 128.2 124.4 149.6 263.9 228.6 299.0 251.4
March 153.1 211.3 130.5 124.4 150.1 263.9 231.2 316.8 259.4
April 154.4 212.1 130.6 124.5 150.8 263.9 230.1 296.5 263.4
May 154.3 212.1 131.7 124.5 150.8 263.9 232.3 275.6 263.7
June 154.2 212.1 135.2 126.8 150.9 263.9 235.2 280.0 262.8
July 154.4 211.3 135.4 127.3 151.4 263.9 238.8 277.6 262.8
August 154.2 211.3 135.4 127.1 151.5 263.9 240.4 285.9 262.8
September 154.6 211.5 137.2 127.2 152.0 275.2 242.0 308.4 262.2
October 154.9 211.5 136.6 127.3 152.3 277.8 239.2 313.5 264.7
November 155.4 211.5 136.3 127.3 152.2 277.8 218.1 318.3 262.1
December 155.3 211.5 137.0 127.3 152.1 277.8 210.8 322.4 260.3
2015
January 155.3 211.5 138.6 127.8 152.2 277.8 200.7 319.6 262.9
February 155.6 217.9 138.1 127.9 152.3 277.8 188.4 306.6 262.9
March 156.3 217.9 136.7 127.5 152.9 277.5 203.2 286.1 262.7
April 156.1 217.9 135.9 127.6 153.0 277.5 195.6 277.4 261.1
May 156.7 217.9 136.2 127.6 153.0 277.5 209.6 274.9 257.5
June 157.8 217.9 136.1 127.6 153.0 277.5 212.0 283.5 256.4
July 158.2 243.5 136.5 127.5 153.0 277.5 200.8 296.2 258.4
August 158.3 243.5 136.4 127.4 153.1 277.5 179.4 316.0 258.5
September 158.9 243.5 137.0 127.4 153.2 277.5 174.0 317.4 263.4
October 158.9 243.5 138.7 127.5 153.2 277.5 176.5 322.2 266.6
November 158.5 243.5 138.6 127.5 153.3 277.5 181.7 330.9 268.4
December 158.5 243.5 138.6 127.8 153.3 277.5 181.7 338.6 269.2
2016
January 158.7 220.6 139.4 127.7 153.4 277.5 174.6 333.5 271.8
February 158.7 220.6 140.2 127.6 153.4 277.5 173.8 326.8 280.7
March 158.9 220.6 139.0 128.0 153.4 277.5 183.3 328.9 281.1
April 159.0 220.6 139.0 127.6 153.4 277.5 187.9 320.0 282.9
May 159.1 220.6 139.2 128.4 153.4 277.5 199.1 310.5 284.5
% change of 1.5 1.2 2.2 0.6 0.3 0.0 -5.0 13.0 10.5
May.,2016 over
May.,2015
*For the year 2015-16 average is from July, 2015 to May, 2016.
Source: Office of the Economic Adviser, Ministry of Commerce and Industry

(Concluded)
63
Annex Table 5.3: Sugarcane: Break-up of cost of Cultivation
(Rs./ha.)
Cost Items Andhra Pradesh Karnataka Maharashtra
2014-15 2013-14 2014-15 2013-14 2014-15 2013-14
Operational Cost 105736.17 53949.59 73315.20 71436.36 143965.79 121180.88
Human Labour
Casual 46402.18 28500.09 26141.01 23875.08 34240.49 34014.64
Attached 1079.28 0.00 0.00 0.00 1214.68 2116.88
Family 14539.39 11865.43 10972.73 14978.77 21819.98 12890.54
Total 62020.85 40365.52 37113.74 38853.85 57275.15 49022.06
Bullock Labour
Hired 1532.42 253.77 1050.20 416.14 5817.96 4097.77
Owned 66.20 0.00 1574.02 848.19 2101.30 1808.25
Total 1598.62 253.77 2624.22 1264.33 7919.26 5906.02
Machine Labour
Hired 3295.37 2500.53 2741.28 8149.15 18952.32 19808.67
Owned 89.48 0.00 603.07 1788.60 900.43 451.32
Total 3384.85 2500.53 3344.35 9937.75 19852.75 20259.99
Seed 14084.38 2237.08 11052.66 5023.89 9034.64 5615.31
Fertilisers and Manure
Fertilisers 14181.00 3649.75 11316.06 9442.72 18938.94 20162.32
Manure 781.84 491.17 554.11 924.61 6249.90 2429.60
Total 14962.84 4140.92 11870.17 10367.33 25188.84 22591.92
Insecticides 789.20 0.00 119.96 151.28 782.94 377.69
Irrigation Charges 3530.91 1976.23 3522.89 2516.90 16727.16 11037.87
Interest on Working Capital 5364.52 2475.54 3667.21 3321.03 7185.05 6370.02
Miscellaneous 0.00 0.00 0.00 0.00 0.00 0.00
Fixed Cost 57831.63 52097.41 44905.30 42270.94 49398.71 49750.12
Rental Value of Owned Land 50491.14 49450.49 36062.55 37405.00 33276.51 41340.93
Rent Paid for Leased-in Land 2203.12 0.00 0.00 0.00 0.00 0.00
Land Revenue, Cesses & Taxes 0.00 0.00 24.11 10.75 274.80 265.84
Depreciation on Implements & Farm 297.04 471.59 320.12 713.32 1249.00 915.05
Buildings
Interest on Fixed Capital 4840.33 2175.33 8498.52 4141.87 14598.40 7228.30
Total Cost 163567.80 106047.00 118220.50 113707.30 193364.50 170931.00
(Contd..)
64 2 0 1 7 - 1 8 S U G A R S E A S O N
Annex Table 5.3: Sugarcane: Break-up of cost of Cultivation
(Rs./ha.)
Cost Items Tamil Nadu Uttar Pradesh Uttarakhand
2014-15 2013-14 2014-15 2013-14 2014-15 2013-14
Operational Cost 123398.90 120013.11 52322.23 46941.32 44578.20 48359.70
Human Labour
Casual 63634.46 68133.72 15606.25 12478.00 18046.64 10381.07
Attached 1202.74 693.31 85.58 923.96 29.41 0.00
Family 20359.99 18697.33 16345.63 13386.76 8476.68 17012.78
Total 85197.19 87524.36 32037.46 26788.72 26552.73 27393.85
Bullock Labour
Hired 497.05 788.35 44.45 101.60 22.28 0.00
Owned 21.21 65.29 408.80 920.64 108.75 671.28
Total 518.26 853.64 453.25 1022.24 131.03 671.28
Machine Labour
Hired 2440.50 1095.04 968.33 881.31 857.00 599.43
Owned 375.39 133.55 395.05 223.79 928.46 1588.13
Total 2815.89 1228.59 1363.38 1105.10 1785.46 2187.56
Seed 5798.43 4287.86 4734.35 6486.15 6972.70 9539.02
Fertilisers and Manure
Fertilisers 12092.51 12189.82 3794.92 3718.57 2382.29 3150.46
Manure 2532.26 2846.49 249.50 415.55 1179.97 639.04
Total 14624.77 15036.31 4044.42 4134.12 3562.26 3789.50
Insecticides 674.78 454.65 388.18 474.96 108.04 235.69
Irrigation Charges 7708.47 4667.95 7184.92 4955.23 3342.36 2674.84
Interest on Working Capital 6061.11 5959.75 2116.27 1973.80 2123.62 1843.94
Miscellaneous 0.00 0.00 0.00 1.00 0.00 24.02
Fixed Cost 37493.10 37637.89 45594.86 39184.46 47491.03 27930.10
Rental Value of Owned Land 26551.58 30087.23 36642.05 33211.37 39347.08 23652.45
Rent Paid for Leased-in Land 57.87 0.00 428.11 50.76 0.00 0.00
Land Revenue, Cesses & Taxes 11.62 6.71 13.45 24.99 17.76 19.67
Depreciation on Implements & Farm 658.43 738.03 1685.40 936.78 1071.43 878.70
Buildings
Interest on Fixed Capital 10213.60 6805.92 6825.85 4960.56 7054.76 3379.28
Total Cost 160892.00 157651.00 97917.09 86125.78 92069.23 76289.80
Source: DES (Concluded)

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Price Policy for

Commission for Agricultural Costs and Prices

Preface and Acknowledgements

16th August 2016 (Vijay Paul Sharma)

2017-18 SUGAR SEASON iii

Summary of Recommendations xiv

Price Policy Recommendations xiv

Non-Price Recommendations xvi

Monitoring of Ex-Mill Prices 4

Key Issues Confronting Sugarcane Sector 5

Promoting Efficiency in Sugarcane and Sugar Production 5

Sucrose Content and Recovery Rate of Sugarcane 5

Mechanization of Sugarcane Cultivation and Harvesting Operations 6

Sugarcane: A Water Intensive Crop 6

Transparency in Weighing of Sugarcane 7

Development of Sugar Sector as Energy Hub 7

Structure of the Report 9

2017-18 SUGAR SEASON v

2. Demand Supply and Price Policy 10

District Level Productivity of Sugarcane 22

vi 2017-18 SUGAR SEASON

6. Considerations and Recommendations for Price Policy 41

State Advised Price (SAP) and Cane Price Arrears 42

Sugarcane Pricing: Adoption of Hybrid Formula 42

Monitoring of Ex-Mill Prices 43

Sugar Development Fund (SDF) 43

De-reservation of Sugarcane Area and Removal of Minimum Distance 43

Promoting Efficiency in Sugarcane and Sugar Production 44

Sucrose Content and Recovery Rate of Sugarcane 44

Mechanization of Sugarcane Cultivation and Harvesting Operations 45

Increasing Productivity and Profitability 45

Transparency in Weighing of Sugarcane 46

Product Diversification for Financial Health of Sugar Mills 46

Cost of Production and FRP of Sugarcane 47

2017-18 SUGAR SEASON vii

Table 1.1 Number of Sugar Mills and Distillation Capacity, 2015-16 8

Table 2.2 Cane Price Payable to Farmers in UP as a Percentage of Value of 12

Table 3.1 Average Annual Growth Rates of Sugarcane, 1990s to 2010s 19

2017-18 SUGAR SEASON ix

Table 1.2 State-wise Production of Sugar 52

x 2017-18 SUGAR SEASON

2017-18 SUGAR SEASON xi

2017-18 SUGAR SEASON xiii

2017-18 SUGAR SEASON xv

2017-18 SUGAR SEASON 1

Source: DES and Directorate of Sugar, DFPD

2017-18 SUGAR SEASON 3

Monitoring of Ex-Mill Prices

Sucrose Content and Recovery Rate of Sugarcane

Mechanization of Sugarcane Cultivation and Harvesting Operations

Sugarcane: A Water Intensive Crop

6 2017-18 SUGAR SEASON

Development of Sugar Sector as Energy Hub

2017-18 SUGAR SEASON 7

Particulars Units (Number) Capacity

8 2017-18 SUGAR SEASON

Structure of the Report

2017-18 SUGAR SEASON 9

Domestic Market Scenario

2.2 Demand-supply dynamics of sugar has a major impact on production of sugarcane

Demand Supply and Price Policy

Note: ALS/AAS: Advanced License Scheme/ Advanced Authorization Scheme

State Advised Price (SAP): A Source of Distortion

2017-18 SUGAR SEASON 11