Price Policy forSugarcaneTHE MARKETING SEASON 2017-18

Price Policy forSugarcaneTHE MARKETING SEASON 2017-18

Commission for Agricultural Costs and PricesÑf"k] lgdkfjrk ,oa fdlku dY;k.k foHkkx

Department of Agriculture, Cooperation and Farmers WelfareÑf"k ,oa fdlku dY;k.k ea=ky;

Ministry of Agriculture and Farmers WelfareHkkjr ljdkj

Government of IndiaubZ fnYyhNew DelhivxLr] 2016

August, 2016

2017-18 SUGAR SEASON

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Vijay Paul Sharma Commission for Agricultural Costs and PricesChairman Department of Agriculture, Cooperation

and Farmers Welfare Ministry of Agriculture and Farmers Welfare Krishi Bhawan, New Delhi 110 001

Tel: 011-23385216Fax: 011-23383848

Preface and AcknowledgementsIt 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)

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ContentsS. No. Description Page No.

Acronyms xi

Summary of Recommendations xiv

Price Policy Recommendations xiv

Non-Price Recommendations xvi

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

Cont

ents

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Cont

ents

S. No. Description Page No.

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 Criterion

17

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

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

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Cont

ents

S. No. Description Page No.

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 Criterion

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

Improve Water Use Efficiency and Sustainability of Sugarcane Production

46

Product Diversification for Financial Health of Sugar Mills 46

Cost of Production and FRP of Sugarcane 47

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List

of T

able

s

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 Sugar

12

Table 2.3 State-wise Cane Arrears, upto 2015-16 14

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, 2014-15

24

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

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List

of C

hart

s

List of ChartsChart No. Topic Page No.

Chart 1.1 Production of Sugarcane, Sugar and Cane Crushed, 2001-02 to 2015-16

2

Chart 1.2 State-wise Share in Production of Sugarcane and Sugar, TE2015-16

3

Chart 2.1 Cane Price Arrears, 2009-10 to 2015-16 13Chart 3.1 All India Area, Production and Productivity of Sugarcane, 2006-07

to 2015-1620

Chart 3.2 State-wise Production and Productivity of Sugarcane, TE2015-16 21Chart 3.3 State-wise Productivity of Sugarcane, 2006-07 to 2015-16 21Chart 3.4 Benchmarking Sugarcane Productivity and Efficiency Gaps 23Chart 3.5 State-wise Installed Capacity and Capacity Utilization of Sugar

Mills, 2014-1525

Chart 4.1 Major Producers of Sugarcane and Sugar Beet, TE2014 26Chart 4.2 Major Producers of Sugar, TE2015-16 27Chart 4.3 Major Exporters and Importers of Sugar, TE2015-16 27Chart 4.4 India’s Exports and Imports of Sugar, 2004-05 to 2015-16 28Chart 4.5 International and Domestic Wholesale Prices of Sugar, 2011 Q1 to

2016 Q2

31

Chart 5.1 Gross and Net Returns of Sugarcane (TE2014-15) 34Chart 5.2a Annual Average Growth in Wages of Agricultural Labour (During

2013-14 to 2015-16 at Current Prices)35

Chart 5.2b Annual Average Growth in Wages of Agricultural Labour (During 2013-14 to 2015-16 at Constant Prices 2015-16 = 100)

36

Chart 5.2c Annual Average Daily Wages of Agricultural Labour 2015-16 andGrowth in Wages 2015-16 over 2014-15

36

Chart 5.3 Movements in Prices of Farm Inputs 37Chart 5.4 Share of Inputs in Total Cost of Production (C2), TE2014-15 37Chart 5.5 Supply Curve and Projected Cost, Sugar Season 2017-18 39

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List

of A

nnex

Tab

les

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

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 Labour (Man)

60

Table 5.2 Farm Inputs- Wholesale Price Index (Base 2004-05=100) 62

Table 5.3 Sugarcane: Break-up of Cost of Cultivation 64

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Acro

nym

s

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

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

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Acro

nym

s

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

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

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Acro

nym

s

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

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

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Summary of RecommendationsPrice Policy RecommendationsS.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

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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 RecommendationsMechanization 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

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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.

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Chap

ter 1

OverviewChapter 1

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 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.

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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

Chart 1.1: Production of Sugarcane, Sugar and Cane Crushed, 2001-02 to 2015-16

Source: DES and Directorate of Sugar, DFPD

22

24

26

28

30

200225250275300325350375

tonn

es

n to

nnes

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

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

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20

0255075

100125150175

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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

Source: DES and Directorate of Sugar, DFPD

UP38.7%

Maha21.9%

Kar11.3%

TN8.2%

AP3.3%

Bih3.9%

Guj3.7%

Others9.0%

a: Sugarcane

UP26.4%

Maha34.5%

Kar16.9%

TN4.7%

AP3.5%

Bih2.1%

Guj4.4%

Others7.5%

b: Sugar

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

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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

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.

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Key Issues Confronting Sugarcane Sector1.10 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

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

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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.

Mechanization of Sugarcane Cultivation and Harvesting Operations

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 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.

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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 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.

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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 dayKLPD: Kilo ltr. per daySource: 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 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

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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.

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Chap

ter 2

Demand Supply and Price Policy Chapter 2

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

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

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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. No.

Particulars 2013-14 2014-15 Provisional

2015-16 Projected

1 Net Opening Stock 91.09 77.63 102.062 Production 245.54 284.63 251.00

3 Imports 8.80 15.40 19.40

4 Estimated Total Availability (Row 1 + Row 2 + Row 3)

345.43 377.66 372.46

5 Estimated Releases for Internal Consumption 243.00 256.00 240.006 Export against ALS/AAS obligation and OGL 24.80 19.60 38.307 Total Estimated Releases (Row 5 + Row 6) 267.80 275.60 278.308 Estimated Closing Stock (Row 4 - Row 7) 77.63 102.06 94.169 Stock-to-Use ratio (%) {(Row 8/ Row 7)*100} 28.99 37.03 33.83

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

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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 Season

Ex-Mill Sugar Prices

(Rs/qtl)

Cane price

paid to farmers

(SAP) (Rs/qtl)

State Recovery Rate (%)

Total Sugar Value from 1 qtl. of cane (Rs/qtl)

Farmers share in total revenue (Cane price paid

to farmers/total sugar value)*100

Cane price payable to

farmers under revenue

sharing formula (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/

(5)(8)=(3)*100/

(6)(9)=0.75*(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

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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

Position as on 31.05 of Sugar Season Source: Directorate of Sugar (DFPD)

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

0

5

10

15

20

25

30

35

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Perc

ent

Rs. C

rore

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.

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Table 2.3: State-wise Cane Arrears, upto 2015-16 (As on 26th July 2016) (Rs. Crores)

State2015-16 2014-15 2013-

14 & earlier

Total

SAP Total (SAP+FRP) SAP Total

(SAP+FRP) SAP (SAP+FRP)

Bihar 0 30 0 6 40 0 76Haryana 126 126 11 11 0 137 137Punjab 226 226 0 0 0 226 226Uttarakhand 138 211 0 0 25 163 236Uttar Pradesh 1714 3043 56 56 112 1882 3211Andhra Pradesh 0 81 0 37 0 0 118Telangana 0 30 0 0 0 0 30Gujarat 0 203 0 0 13 0 216Maharashtra 0 494 0 158 70 0 722Karnataka 0 185 0 40 117 0 342Tamil Nadu 551 1030 288 288 273 1112 1591Puducherry 0 10 0 5 3 0 18Chhattisgarh 0 1 0 0 0 0 1Odisha 0 19 0 0 3 0 22Madhya Pradesh 0 6 0 0 13 0 19

Goa 0 1 0 0 0 0 1All-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.

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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.

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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.

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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

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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.

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Productivity of Sugarcane

Chap

ter 3

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.

Table 3.1: Average Annual Growth Rates of Sugarcane, 1990s to 2010s(percent)

1990s 2000s 2010sArea Uttar Pradesh 1.4 0.0 1.6Maharashtra 5.9 8.4 5.2Karnataka 3.9 1.8 5.5Tamil Nadu 4.0 1.1 -1.7All India 2.3 0.4 3.1ProductionUttar Pradesh 1.9 0.4 3.7Maharashtra 6.4 9.8 3.3Karnataka 7.1 2.4 4.9Tamil Nadu 5.1 1.1 -1.3All India 3.1 0.6 3.4YieldUttar Pradesh 0.5 0.5 2.1Maharashtra 0.3 0.1 -2.1Karnataka 2.7 -0.2 -0.8Tamil Nadu 0.8 -0.6 0.5All 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.

Chapter 3

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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

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 2015-16Area 3.1 -0.8 -0.1 1.5 -2.2Production 5.4 -5.5 3.2 2.9 -2.8Productivity 2.2 -4.8 3.3 1.4 -0.6

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

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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

Source: DES

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

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Chart 3.3: State-wise Productivity of Sugarcane, 2006-07 to 2015-16

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

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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

Year<50 t/ha 50-80 t/ha > 80 t/ha

No. of Districts

Area (%)No. of

DistrictsArea (%)

No. of Districts

Area (%)

Uttar Pradesh (41.4%)2000-01 34 16.5 35 83.5 0 0.02013-14 13 2.9 62 97.1 0 0.0

Maharashtra (23.0%)2000-01 0 0.0 17 44.3 10 55.72013-14 0 0.0 15 30.3 13 69.7

Karnataka (11.7%)2000-01 0 0.0 5 13.0 20 87.02013-14 0 0.0 4 14.1 21 85.9

Tamil Nadu (8.4%)2000-01 0 0.0 0 0.0 19 100.02013-14 0 0.0 3 12.9 19 87.1

Note: Figures in parenthesis indicate share in total production, TE 2015-16

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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

Source: FAO and DES

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

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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

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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 Sugar Mills

Installed Capacity

(lakh tonne)

Sugar Production

(lakh tonne)

Sugar Recovery (percent)

Maharashtra 179 106 105 11.67Uttar Pradesh 118 95 71 9.49Karnataka 65 42 50 10.90Tamil Nadu 43 29 13 8.10Andhra Pradesh 22 11 6 9.72Gujarat 19 15 11 10.48Punjab 16 6 5 9.37Madhya Pradesh 16 4 4 10.48Haryana 14 6 6 9.89Bihar 11 6 5 9.10Telangana 10 4 3 10.47Total 533 329 285 10.44

Note: Data as on 30.09.2015Source: 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.

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Chart 3.5: State-wise Installed Capacity and Capacity Utilization of Sugar Mills, 2014-15

Note: data as on 30.09.2015Source: Directorate of Sugar

MH UP Kar TN AP Guj

Installed capacity 106 95 42 29 11 15

Capacity utilization 99 75 118 44 51 78

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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.

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Chap

ter 4

Trade Competitiveness of Indian Sugar Chapter 4

Global Scenario: Production and Trade in Sugar

4.1 Sugarcane and Sugar beet are the main sources of sugar. Approximately 80 percent of global sugar is produced from sugarcane whereas 20 percent is produced from sugar beet. As per FAO, global production of sugarcane was 1.88 billion tonnes in TE2014. Brazil is the largest producer of sugarcane with a share of 39.5 percent (0.74 billion tonnes). Other major producers of sugarcane are India (18.7 percent), China (6.7 percent) and Thailand (5.4 percent) [Chart 4.1a]. As per FAO, global production of sugar beet was 0.26 billion tonnes in TE2014. EU is the largest producer of sugar beet with a share of 45.1 percent (0.12 billion tonnes). Other major producers of sugar beet are Russia (15.0 percent), USA (11.5 percent), and Turkey (6.1 percent) [Chart 4.1b].

Chart 4.1a & b: Major Producers of Sugarcane and Sugar Beet, TE2014

Source: FAO

Brazil39.5%

India18.7%

China6.7%

Thailand5.4%

Pakistan3.4%Mexico

3.0%Others 23.3%

a: Sugarcane

04.08.206

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Chapter-4 Trade Competitiveness of Indian Sugar

Global Scenario: Production and Trade in Sugar

4.1 Sugarcane and Sugar beet are the main sources of sugar. Approximately 80 percent of global

sugar is produced from sugarcane whereas 20 percent is produced from sugar beet. As per FAO, global production of sugarcane was 1.88 billion tonnes in TE 2014. Brazil is the largest producer of sugarcane with a share of 39.5 percent (0.74 billion tonnes). Other major producers of sugarcane are India (18.7 percent), China (6.7 percent) and Thailand (5.4 percent) [Chart 4.1 (a)]. As per FAO, global production of sugar beet was 0.26 billion tonnes in TE 2014. EU is the largest producer of sugar beet with a share of 45.1 percent (0.12 billion tonnes). Other major producers of sugar beet are Russia (15.0 percent), USA (11.5 percent), and Turkey (6.1 percent) [Chart 4.1 (b)].

Chart 4.1 (a) & (b): Major Producers of Sugarcane and Sugar beet, TE 2014

a: Sugarcane b: Sugar beet

Source: FAO

4.2 As per USDA, Global 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].

Brazil39.5%

India18.7%

China6.7%

Thailand5.4%

Pakistan3.4%Mexico

3.0%Others 23.3%

EU45.1%

Russia15.0%

USA11.5%

Turkey6.1%

Ukraine5.7%

Egypt3.9%

China3.7%

Others9.0%

b: Sugar Beet

272 0 1 7 - 1 8 S U G A R S E A S O N

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

Source: USDA

Brazil20.9%

India16.4% EU

9.4%

Thailand6.1%

China6.5%

USA4.6%

Mexico3.7%Others

32.4%

Brazil44.4%

Thailand14.5%

Australia6.2%

India4.9%

uatemala4.0%

Mexico3.2%

EU2.8%

Others20.0%

China10.2%

Indonesia6.3%

EU6.2%

USA6.1%

UAE4.4%

Bangladesh 4.1%

Malaysia3.8%

Korea South3.6%

Algeria3.5%

Nigeria2.8%

Saudi Arabia2.6%

Japan2.5%

Egypt2.2%

Canada2.2%

Iran2.1%

Others37.4%

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, TE2015-16a: Exporters b: Importers

Source: USDA

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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 2015-16Chart 4.4a: Exports of Sugar

Chart 4.4b: Imports of Sugar

Source: DGCIS

Source: DGCIS

Quanti

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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

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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

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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

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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

Source: LIFFE for International Prices and Ministry of Consumer Affairs for Domestic Prices at Mumbai.

2011 Q1

2011 Q2

2011 Q3

2011 Q4

2012 Q1

2012 Q2

2012 Q3

2012 Q4

2013 Q1

2013 Q2

2013 Q3

2013 Q4

2014 Q1

2014 Q2

2014 Q3

2014 Q4

2015 Q1

2015 Q2

2015 Q3

2015 Q4

2016 Q1

2016 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

2000

2300

2600

2900

3200

3500

3800

Rs./Quintal

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)

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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

CommodityPrice Forecast (US $/tonne)

2016 2019 2022 2025Raw Sugar 325.3 335.8 333.1 341.9Refined 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.

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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 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

Costs, Returns and Inter-Crop Price Parity

Chap

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Chapter 5

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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)

S. N. State

Cost A2 Cost A2+FL

Cost C2 GVO Gross Returns over A2

Gross Returns over A2+FL

Net Returns

Rs./ha.Rs./ha. (Col.6-Col.3)

Percent (Col.7/

Col.3*100)

Rs./ha. (Col.6-Col.4)

Percent (Col.9/

Col.4*100)

Rs./ha. (Col.6-Col.5)

Percent (Col.11/

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 503 Kar 54336 66616 109394 174732 120396 222 108117 162 65338 604 Mah 111359 127264 176753 236205 124846 112 108940 86 59452 345 TN 103890 122909 158954 235760 131871 127 112851 92 76806 486 UP 36853 51150 90898 153014 116161 315 101864 199 62116 687 UK 33745 45750 78654 143641 109896 326 97891 214 64987 83ALL 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)

Source: CACP calculations

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

35000450005500065000750008500095000

105000115000125000135000

Rs./

a.

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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)

Source: Labour Bureau, ShimlaNote: For the year 2015-16 the annual average is from July, 2015 to May, 2016

AP Ass BH GJ HR HP Kar Ker MP MH Odi Pun Raj TN UP WBAll

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

-5.0

2.0

9.0

16.0

23.0

30.0

37.0

Gro

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(%)

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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).

Chart 5.2b: Annual Average Growth in Wages of Agricultural Labour(2013-14 to 2015-16 at Constant Prices 2015-16 = 100)

AP Ass BH GJ HR HP Kar Ker MP MH Odi Pun Raj TN UP WBAll

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

-12.0-8.0-4.00.04.08.0

12.016.020.024.0

Gro

wth

(%)

Source: Labour Bureau, Shimla

Chart 5.2c: Annual Average Daily Wages of Agricultural Labour 2015-16 and Growth in Wages 2015-16 over 2014-15

Source: Labour Bureau, Shimla

KER TN HP HR Pun RAJ KRNAll-

IndiaAP WB BH ASS MH UP GJ ODI MP

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

-6.0-4.0-2.00.02.04.06.08.010.012.014.0

-300-200-100

0100200300400500600700

Gro

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in W

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(%)

Ave

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Dai

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ages

(Rs.

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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 5.3: Movements in Prices of Farm Inputs(March-May, 2016 over March-May, 2015)

Source: DIPP, Ministry of Commerce and Industry

Diesel (HSD)

Ferti.Elect. (Irr.)

Trac. Lub.Cattle Feed

Fodder Pest.Non-Elect.

(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

-200-150-100-50050100150200250300350400

-8.0-6.0-4.0-2.00.02.04.06.08.0

10.012.014.016.0

Percen

t

WPI

Chart 5.4: Share of Inputs in Total Cost of Production (C2), TE2014-15

Human Labour33.4%

Land31.3%

Capital12.9%

Fertilizer7.8%

Others14.6%

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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)

S.No. State

Costs at State-specific recovery rates

Costs at 9.5 percent recovery rate

Cost of Transportation and Insurance

Premium

Modified Cost#

A2 A2+FL C2 A2 A2+FL C2

(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.

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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.

175

190

205

220

235

250

265

on (R

s. p

er q

uint

al)

All India C2 Cost =Rs.211/qtl.

MSP Recommended = Rs.255/qtl

100

115

130

145

160

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

Cost

of P

rodu

ctio

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.

All India A2+FL Cost =Rs152/qtl.

All India A2 Cost = Rs.121/qtl.

Chart 5.5: Supply Curve and Projected Cost, Sugar Season 2017-18

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Table 5.3: Sugarcane Relative Returns (Percent)(Average 2012-13 to 2014-15)

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

Source: CACP Calculations

40 2 0 1 7 - 1 8 S U G A R S E A S O N

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.

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S. No.

Crop Cost A2 Cost A2+FL

Cost C2 GVO Gross Returns over A2

Gross Returns over A2+FL

Net Returns Per Month Gross

Returns over A2

(Rs./ha.)

Per Month Gross

Returns over A2+FL

(Rs./ha.)

Per Month

Net Returns

(Rs./ha.)

Rs./ha. (Col.6-Col.3)

Percent (Col.7/Col.3* 100)

Rs./ha. (Col.6-Col.4)

Percent (Col.9/Col.4 *100)

Rs./ha. (Col.6-Col.5)

Percent (Col.11/

Col.5 *100)

Rs./ha.

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15)

Sugarcane 1 All-

India 61985 76429 118746 180556 118571 191 104127 136 61810 52 9881 8677 5151

2 UP 36853 51150 90898 153014 116161 315 101864 199 62116 68 9680 8489 51763 Kar 54336 66616 109394 174732 120396 222 108117 162 65338 60 10033 9010 54454 Mah 111359 127264 176753 236205 124846 112 108940 86 59452 34 10404 9078 4954

Paddy 1 All-

India 25179 33631 47547 53242 28063 111 19611 58 5696 12 7016 4903 1424

2 Pun 30983 36013 62313 87006 56023 181 50993 142 24692 40 14006 12748 61733 Har 29633 37156 60828 91310 61677 208 54154 146 30482 50 15419 13538 76204 AP 36219 42466 66088 75060 38841 107 32594 77 8972 14 9710 8149 22435 UP 21563 29522 43024 51255 29692 138 21733 74 8232 19 7423 5433 20586 Kar 36003 42183 60514 78069 42066 117 35886 85 17554 29 10516 8971 4389

Cotton 1 All-

India 37266 46208 64931 74519 37253 100 28311 61 9588 15 9313 7078 2397

2 Guj 34929 44670 61160 80688 45759 131 36018 81 19527 32 11440 9005 48823 Mah 43583 51672 68740 71689 28106 64 20017 39 2949 4 7027 5004 737

Wheat 1 All-

India 22742 28879 45814 58340 35598 157 29461 102 12527 27 8900 7365 3132

2 Pun 25587 28184 52169 72748 47160 184 44564 158 20579 39 11790 11141 51453 Har 25364 33380 58462 74251 48887 193 40871 122 15789 27 12222 10218 39474 UP 24191 30338 46774 53370 29179 121 23032 76 6595 14 7295 5758 16495 Mah 28442 34677 46122 46814 18372 65 12137 35 692 2 4593 3034 173

Considerations and Recommendations for Price Policy

Chap

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Chapter 6

2 0 1 7 - 1 8 S U G A R S E A S O N 41

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 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.

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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 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

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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

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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

45

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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.

Mechanization of Sugarcane Cultivation and Harvesting Operations

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.

46

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2 0 1 7 - 1 8 S U G A R S E A S O N

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

47

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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

48 2 0 1 7 - 1 8 S U G A R S E A S O N

Annex Tables

492 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 Rate

FRP linked with RR

Basic Recovery Rate

FRP linked with 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

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*Sub-Tropical Region Area 2736 2662 2474 2323 2635 2663 2756 2781 2688 2697.6Production 161605 151756 129398 137050 150018 159031 165310 167684 167469 179123Yield 59064 57017 52305 58999 56939 59712 59977 60289 62306 66400.9Bihar Area 130 109 112 116 248 218 250 258 254 248.6Production 5956 3855 4960 5033 12764 11289 12741 12882 14034 14676Yield 45953 35496 44324 43422 51466 51714 50896 49916 55179 59034.6Haryana Area 140 140 90 74 85 95 101 102 97 93Production 9580 8860 5130 5335 6042 6959 7437 7499 7169 6510Yield 68429 63286 57000 72095 71082 73253 73634 73520 73907 70000Punjab Area 99 110 81 60 70 80 83 89 94 90Production 6020 6690 4670 3700 4170 5653 5919 6675 7039 6576Yield 60808 60818 57654 61667 59571 70663 71313 75000 74883 73066.7Uttarakhand Area 121 124 107 96 107 108 110 104 102 97Production 6100 7686 5590 5842 6498 6311 6785 5940 6165 5976Yield 50413 61984 52243 60854 60896 58435 61736 56971 60608 61608.2Uttar Pradesh Area 2247 2179 2084 1977 2125 2162 2212 2228 2141 2169Production 133949 124665 109048 117140 120545 128819 132428 134689 133061 145385Yield 59626 57212 52326 59251 56727 59583 59868 60453 62155 67028.6Tropical Region Area 2244 2211 1775 1698 2086 2204 2077 2036 2158 2034.3Production 185684 188234 147670 148456 184529 193553 167556 175195 184228 161914Yield 82739 85128 83199 87419 88460 87803 80664 86034 85367 79592.2Andhra Pradesh Area 264 247 196 158 192 204 196 192 139 122Production 21692 20296 15380 11708 14964 16686 15567 15385 9987 9312Yield 82167 82170 78469 74101 77938 81794 79423 80130 71849 76327.9TelanganaArea 38 35Production 3343 2415Yield 87974 69000

(Contd..)

512 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 183Production 15630 15190 15510 12400 13760 12750 12690 12550 14330 12960Yield 73037 71991 70181 80519 72421 63119 72102 72126 68894 70819.7Karnataka Area 326 306 281 337 423 430 425 420 480 450Production 28670 26240 23328 30443 39657 38808 35732 37905 43776 38475Yield 87944 85752 83018 90335 93752 90251 84075 90250 91200 85500Maharashtra Area 1049 1093 768 756 965 1022 933 937 1030 987Production 78568 88437 60648 64159 81896 86733 69648 76901 84699 72255

Yield 74898 80912 78969 84866 84866 84866 74650 82072 82232 73206.7Tamil Nadu Area 391 354 309 293 316 346 347 313 263 257.3Production 41124 38071 32804 29746 34252 38576 33919 32454 28093 26497.4Yield 105123 107484 106197 101452 108392 111362 97688 103575 106788 102983

All India Area 5151 5055 4415 4175 4885 5038 4999 4993 5067 4953.4Production 355520 348188 285029 292302 342382 361037 341200 352142 362333 352163Yield 69022 68877 64553 70020 70091 71667 68254 70522 71512 71095.2* : Fourth Advance EstimatesSource: DES, Ministry of Agriculture

(Concluded)

52 2 0 1 7 - 1 8 S U G A R S E A S O N

An

nex

Tabl

e 1.

2: S

tate

-wis

e Pr

oduc

tion

of S

ugar

(lakh

tonn

es)

St

ate

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16P

Sub-

Trop

ical

Reg

ion

105.

991

.950

.761

.571

.586

.293

.085

.291

.087

.5Bi

har

4.8

3.4

2.2

2.6

3.9

4.5

5.1

6.0

5.3

5.0

Hary

ana

6.8

6.0

2.3

2.5

3.9

4.9

5.1

5.4

5.7

5.4

Punj

ab5.

55.

32.

41.

83.

03.

94.

44.

75.

46.

7U

ttara

khan

d5.

34.

02.

22.

93.

13.

33.

43.

03.

32.

7U

ttar P

rade

sh83

.573

.241

.551

.757

.669

.675

.066

.171

.467

.8Tr

opic

al R

egio

n17

2.9

167.

694

.812

5.2

168.

317

3.8

154.

815

4.8

187.

915

5.4

Andh

ra P

rade

sh

6.8

5.7

5.5

Tela

ngan

a3.

33.

22.

8An

dhra

Pd+

Tela

ngan

a19

.213

.45.

95.

110

.111

.49.

810

.18.

98.

3Gu

jara

t13

.913

.710

.211

.912

.710

.011

.311

.811

.511

.1Ka

rnat

aka

25.4

28.4

16.8

25.1

36.4

38.7

34.4

41.6

49.9

40.0

Mah

aras

htra

90.1

90.8

46.0

70.4

90.7

90.0

79.9

77.2

105.

286

.1Ta

mil

Nad

u24

.221

.416

.012

.718

.423

.819

.314

.212

.610

.0O

ther

s3.

23.

51.

21.

43.

83.

54.

15.

55.

74.

3Al

l Ind

ia28

2.0

263.

014

6.8

188.

024

3.5

263.

425

1.8

245.

528

4.6

247.

2P

: Pro

visio

nal

Sour

ce: D

irect

orat

e of

Sug

ar, D

FPD

532 0 1 7 - 1 8 S U G A R S E A S O N

Anne

x Ta

ble

1.3:

Ave

rage

Rec

over

y of

Sug

ar fr

om S

ugar

cane

(Oct

.-Sep

t.)(P

erce

nt)

Sta

te 2

006-

0720

07-0

820

08-0

920

09-1

020

10-1

120

11-1

220

12-1

320

13-1

420

14-1

5P20

15-1

6PAn

dhra

Pra

desh

9.7

10.1

9.

9 9.

3 9.

8 9.

8 9.

7 10

.0

9.7

9.3

Biha

r8.

7 9.

2 9.

3 9.

5 9.

3 9.

1 8.

9 9.

1 9.

1 9.

7 Gu

jara

t10

.7

10.9

9.

5 10

.5

10.0

10

.6

10.8

11

.2

10.5

10

.4

Hary

ana

9.7

9.9

9.1

9.4

9.0

9.1

9.8

9.4

9.9

9.4

Karn

atak

a10

.7

10.1

10

.3

10.7

10

.9

11.2

10

.4

11.0

10

.9

10.8

M

ahar

asht

ra11

.4

11.8

11

.5

11.5

11

.3

11.7

11

.5

11.5

11

.7

11.4

Pu

njab

9.5

9.3

9.3

8.6

8.8

9.1

9.1

9.3

9.4

10.0

Ta

mil

Nad

u9.

3 9.

3 9.

6 8.

9 9.

1 9.

4 8.

9 9.

0 8.

1 8.

8 Te

lang

ana

10.5

10

.8

Utta

r Pra

desh

9.5

9.3

8.9

9.1

9.2

9.1

9.2

9.3

9.5

10.6

U

ttara

khan

d9.

5 9.

8 9.

2 9.

2 9.

3 9.

1 9.

2 9.

0 9.

2 9.

5 Al

l Ind

ia10

.2

10.3

10

.1

10.2

10

.2

10.3

10

.0

10.3

10

.4

10.6

P : P

rovi

siona

lSo

urce

: Dire

ctor

ate

of S

ugar

, DFP

D

54 2 0 1 7 - 1 8 S U G A R S E A S O N

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

Bihar Total Molasses produced in the state w.e.f. 01.04.2016 shall be utilised to manufacture ethanol which shall be blended with petrol by the OMCs

Gujarat50% of total production is reserved for use within the state and the balance can be exported 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

Tamil Nadu

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 ethanol for blending with petrol, which has again been discontinued. Export of molasses outside the state is not allowed

Uttarakhand10% of molasses produced is reserved for country liquor and 20% is reserved for export to other states. Balance 70% is un-reserved and can be utilised for any purpose

Uttar Pradesh25% of molasses produced is reserved for use by potable liquor sector. The dispatches are 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.Source: Directorate of Sugar, DFPD

552 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-StateMovement (%)

Others

Rate DetailsAndhra Pd. 5.50 Bihar 5.00 Delhi 2.00 Gujarat 3.00 Haryana 1.00 1.00 Permit FeeJharkhand 1.00 Karnataka 5.50 Kerala 0.56 Madhya Pd. 1.50 1.00 5.00 0.30 Transport Fee

1% Entry FeeMaharashtra 1.50 1.50 5.00 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 StateWest Bengal 0.25

Source: Directorate of Sugar, DFPD

56 2 0 1 7 - 1 8 S U G A R S E A S O N

Annex Table 2.1: Cane Price Payable to Farmers as a Percentage of Value of Sugar

Sugar Season

Ex-Mill Sugar

Prices (Rs/qtl)

Cane price

paid to farmers

(SAP) (Rs/qtl)

State Recovery Rate (%)

Total Sugar Value from 1 qtl. of cane (Rs/qtl)

Farmers share in total revenue (Cane price paid to farmers/

total sugar value)*100

Cane price payable to

farmers under revenue sharing formula (75% of total sugar value

from 1 qtl. of cane)

At State Recovery

Rate

At 9.5% Recovery

Rate

At State Recovery Rate

At 9.5% Recovery Rate

At 9.5% Recovery Rate

(1) (2) (3) (4) (5)=(2)*(4) (6)=(2)*9.5 (7)=(3)*100/(5) (8)=(3)*100/(6)

(9)=0.75*(6)

Maharashtra2010-11 2592.96 11.30 293.00 246.33 184.752011-12 2859.79 11.67 333.74 271.68 203.762012-13 2988.75 220.00 11.45 342.21 283.93 64.29 77.48 212.952013-14 2759.58 11.47 316.52 262.16 196.622014-15 2340.21 245.00 11.67 273.10 222.32 89.71 110.20 166.742015-16 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 77.23 189.362011-12 3949.88 225.00 9.12 360.23 375.24 62.46 59.96 281.432012-13 3137.71 240.00 9.09 285.22 298.08 84.15 80.51 223.562013-14 3036.67 280.00 9.28 281.80 288.48 99.36 97.06 216.362014-15 2575.42 285.00 9.37 241.32 244.66 118.10 116.49 183.502015-16 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 75.55 188.622011-12 2891.25 210.00 9.35 270.33 274.67 77.68 76.46 206.002012-13 3046.46 235.00 8.88 270.53 289.41 86.87 81.20 217.062013-14 2874.38 265.00 8.96 257.54 273.07 102.90 97.05 204.802014-15 2454.17 265.00 8.10 198.79 233.15 133.31 113.66 174.862015-16 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

572 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

StateSugar Season

2013-14 2014-15 2015-16

Andhra Pradesh

Rs.240 to Rs.260 per quintal for Private mills and Rs.216 per quintal for cooperative mills. This includes Rs. 6 per quintal to be paid by State Govt.

The sugar factories are paying over & above ranging from Rs.226 to Rs.256 per quintal. (FRP & purchase tax incentive of Rs.6 per quintal (purchase tax to be remitted by the sugar factories to the Govt is being passed on to the cane suppliers).

Sugar mills are paying FRP with incentives which differ from factory to factory in the range of Rs.230/- to Rs.264.20 per quintal

Bihar

Rs.245 per quintal (Un-recommended varieties)

Rs.250 per quintal (Un-recommended varieties)^

Rs.250 per quintal (Un-recommended varieties)

Rs.255 per quintal (Central Varieties)

Rs.260 per quintal (Central Varieties)^ Rs.260 per quintal (Central Varieties)

Rs.265 per quintal (Early Varieties)

Rs.270 per quintal (Early Varieties)^ Rs.270 per quintal (Early Varieties)

Gujarat Sugar mills to pay FRP or more based on profit sharing

Sugar mills to pay FRP or more based on profit sharing

Sugar mills to pay FRP or more based on profit sharing

Haryana

Rs.301 per quintal (Early Varieties)

Rs.310 per quintal (Early Varieties) Rs.310 per quintal (Early Varieties)

Rs.290 per quintal (Mid Varieties)

Rs.305 per quintal (Mid Varieties) Rs.305 per quintal (Mid Varieties)

Rs.285 per quintal (Normal Varieties)

Rs.300 per quintal (Normal Varieties) Rs.300 per quintal (Normal Varieties)

Karnataka

South Karnataka Rs.250 per quintal Ex-Gate. North Karnataka Rs.250 per quintal Ex-field. Additional Rs. 15 per quintal will be paid by state Govt. to the cane farmers.

State Govt. initially fixed cane price mill-wise, ranging from Rs.220 per quintal upto 9.5% recovery to Rs.291 per quintal at 12.56 % recovery

FRP is the price to be paid by the sugar mills. Ist instalment Rs.220/- to Rs.250/- per quintal including harvesting & transport charges of Rs.50/- per quintal.

Maharashtra

Sugar mills pay mutually agreed price with farmers of their area; final payable price not yet decided

Sugar mills in the State paying FRP based on their recovery % of last season ranging from Rs.220 to Rs.370 per quintal including Rs.50 per quintal transport & harvesting charges

80% of FRP as Ist Instalment. IInd instalment /balance of FRP is to be paid after closure of season. Highest Rs.214.50/-per quintal doodganga and lowest Rs.127.50 per quintal purti S.S.K.

Punjab

Rs.290 per quintal (Early Varieties)

Rs.295 per quintal (Early Varieties) Rs.295 per quintal (Early Varieties)

Rs.280 per quintal (Mid Varieties)

Rs.285 per quintal (Mid Varieties) Rs.285 per quintal (Mid Varieties)

Rs.275 per quintal (Normal Varieties)

Rs.280 per quintal (Normal Varieties) Rs.280 per quintal (Normal Varieties)

Tamil Nadu

Rs.265 per quintal linked to 9.5% with increase of Rs.2.21 for every 0.1% point increase in recovery above 9.5%. (includes Rs.10 per quintal transport)

Rs.265 per quintal linked to 9.5% with increase of Rs.2.21 for every 0.1% point increase in recovery above 9.5%. (includes Rs.10 per quintal transport)

Rs.285 per quintal linked to 9.5% with increase of Rs.2.42 for every 0.1% point increase in recovery above 9.5%. (includes Rs.10 per quintal transport)

(Contd..)

58 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

State Sugar Season2013-14 2014-15 2015-16

Telengana

- Farmers are getting cane price ranging from Rs.226 to Rs.265 per quintal

All 7 sugar mills are paying same price based on G.O.I notification ranging from Rs.237.50 to Rs.270.0 per quintal.

Uttarakhand

Rs.295 per quintal (Early Varieties)

Rs.290 per quintal (Early Varieties) Rs.290 per quintal (Early Varieties)

Rs.285 per quintal (General Varieties)

Rs.280 per quintal (General Varieties) Rs.280 per quintal (General Varieties)

Uttar Pradesh

Rs.290 per quintal (Early Varieties)*

Rs.290 per quintal (Early Varieties)* Rs.290 per quintal (Early Varieties)*

Rs.280 per quintal (Normal Varieties)*

Rs.280 per quintal (Normal Varieties)* Rs.280 per quintal (Normal Varieties)*

Rs.275 per quintal (Rejected Varieties)*

Rs.275 per quintal (Rejected Varieties)* Rs.275 per quintal (Rejected Varieties)*

FRP

Basic FRP at 9.5 % recovery Rs.210 per quintal with additional increase of Rs.2.21 for every 0.1% point increase in the basic recovery %

Basic FRP at 9.5 % recovery Rs.220 per quintal with additional increase of Rs.2.32 for every 0.1% point increase in the basic recovery %

Basic FRP at 9.5 % recovery Rs.230 per quintal with additional increase of Rs.2.42 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 - Mill 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. Source: Directorate of Sugar, DFPD

(Concluded)

592 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

Benchmarking States TE2015-16TN (104.5, 8.4%), Karnataka (89, 11.7%), MH (79.7, 23%), AP (76.1, 3.4%), UP (62.1, 41.4%), Bihar (53.6, 4.1%), Gujarat (70.6, 3.9%)

Benchmarking Countries TE2014Guatemala (99, 1.3%), Colombia (88.2, 1.8%), Australia (80.2, 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 Benchmark Country (%)

29.7

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

31.6

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

60 2 0 1 7 - 1 8 S U G A R S E A S O N

Anne

x Ta

ble

5.1:

Mon

th-w

ise

and

Stat

e-w

ise

Aver

age

Wag

e Ra

tes f

or A

gric

ultu

ral L

abou

r (M

an)

(Rs.

/day

)

Mon

th/Y

ear

APAS

SBH

GJ

HRHP

KRN

KER

MP

MH

ODI

Punj

abRA

JTN

UP

WB

All

Indi

aJa

nuar

y, 20

1217

712

711

311

320

523

713

739

299

153

135

219

162

209

126

142

148

Febr

uary

203

131

124

115

212

241

145

420

100

153

140

235

172

231

136

151

157

Mar

ch

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

Augu

st19

313

814

312

622

924

616

845

311

917

015

224

121

325

314

916

717

5Se

ptem

ber

205

140

144

126

229

246

170

455

121

173

143

240

214

252

153

165

177

Oct

ober

199

145

147

126

238

246

173

461

119

174

135

278

216

251

156

165

179

Nov

embe

r21

014

814

812

623

325

117

846

112

017

313

727

421

724

615

817

118

0De

cem

ber

224

145

151

127

228

260

177

461

120

182

138

273

221

247

160

173

184

Janu

ary,

2013

224

146

162

130

246

273

184

465

126

186

136

257

219

253

163

178

187

Febr

uary

228

157

164

130

245

259

188

465

126

192

134

260

204

259

165

180

187

Mar

ch

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

Augu

st21

018

317

713

731

728

421

048

713

320

015

727

921

527

518

120

019

9Se

ptem

ber

213

178

176

138

312

290

212

490

138

196

150

21

928

418

120

019

2O

ctob

er21

217

517

513

931

229

821

348

714

419

915

628

322

929

418

019

920

3N

ovem

ber

247

184

205

142

328

337

235

585

140

221

196

24

833

019

222

421

4De

cem

ber

242

181

191

165

325

356

228

580

151

216

179

278

247

352

186

229

222

(Con

tinue

d)

612 0 1 7 - 1 8 S U G A R S E A S O N

Anne

x Ta

ble

5.1:

Mon

th-w

ise

and

Stat

e-w

ise

Aver

age

Wag

e Ra

tes f

or A

gric

ultu

ral L

abou

r (M

an)

(Rs.

/day

)M

onth

/Yea

rAP

ASS

BHG

JHR

HPKR

NKE

RM

PM

HO

DIPu

njab

RAJ

TNU

PW

BAl

l Ind

iaJa

nuar

y, 20

1422

918

219

417

232

033

623

758

015

521

517

827

626

235

519

122

922

5Fe

brua

ry22

618

820

017

232

933

624

062

915

821

418

027

525

136

219

123

022

6M

arch

22

218

920

217

533

334

124

359

416

121

916

427

927

035

619

522

322

9Ap

ril22

219

920

417

933

535

224

059

416

322

316

030

629

136

120

122

623

5M

ay22

520

320

617

934

633

524

259

416

522

317

330

728

336

420

222

523

5Ju

ne21

720

420

717

934

734

124

159

416

423

019

130

428

036

219

922

723

5Ju

ly23

020

821

818

534

534

524

159

917

322

520

130

232

037

220

022

624

4Au

gust

226

220

220

190

348

343

241

599

173

226

208

304

305

371

202

230

243

Sept

embe

r23

922

522

019

035

034

324

258

618

022

220

431

029

641

719

823

424

6O

ctob

er24

122

622

219

835

433

924

258

617

122

220

231

029

741

220

123

724

6N

ovem

ber

247

238

220

198

357

330

244

597

170

223

200

312

305

421

199

236

248

Dece

mbe

r23

623

422

019

234

434

925

260

417

622

219

430

730

741

719

923

724

7Ja

nuar

y, 20

1524

623

521

919

433

836

325

464

317

822

520

128

629

843

020

024

124

9Fe

brua

ry25

023

422

119

433

536

325

264

317

922

520

229

028

744

020

224

124

9M

arch

24

522

622

819

434

136

325

364

217

922

620

228

128

442

920

524

224

8Ap

ril24

522

523

019

534

036

325

365

218

223

120

127

729

140

320

924

224

9M

ay23

523

123

119

634

536

226

065

218

323

220

029

227

940

520

824

224

9Ju

ne23

923

923

719

634

635

126

066

418

822

820

331

128

239

920

724

025

0Ju

ly22

923

624

220

335

036

126

966

418

623

420

631

129

539

321

124

025

3Au

gust

241

238

246

203

355

366

277

653

188

233

202

304

300

404

214

239

257

Sept

embe

r24

123

924

620

335

437

227

865

619

022

819

630

330

439

421

424

125

6O

ctob

er24

023

624

420

335

436

727

965

618

923

320

029

829

839

221

523

725

6N

ovem

ber

276

243

243

203

351

374

285

657

182

228

204

301

303

382

216

237

259

Dece

mbe

r27

824

124

520

336

137

928

665

718

022

920

030

130

238

321

924

826

0Ja

nuar

y, 20

1627

623

524

820

635

437

128

566

418

323

119

928

827

638

121

825

125

6Fe

brua

ry25

423

324

820

635

937

128

166

618

222

919

530

027

038

321

725

225

3M

arch

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

Not

e:

Daily

Wag

e Ra

te -

Aver

age

of F

ive

Ope

ratio

ns i.

e. P

loug

hing

, Sow

ing,

Wee

ding

, Tra

nspl

antin

g an

d Ha

rves

ting

Sour

ce: L

abou

r Bur

eau,

Min

istry

of L

abou

r, Go

vt. o

f Ind

ia(C

oncl

uded

)

62 2 0 1 7 - 1 8 S U G A R S E A S O N

Anne

x Ta

ble

5.2:

Far

m In

puts

- Who

lesa

le P

rice

Inde

x (B

ase

2004

-05=

100)

Mon

th/Y

ear

Fer

tilis

ers

Ele

ctric

ity

(Irrig

ation

) P

estic

ides

Non

-Ele

ctric

al

Mac

hine

ryTr

acto

rs L

ubric

ants

High

Spe

ed

Dies

el

(HSD

)

Fod

der

Catt

le

Feed

Annu

al A

vera

ge (J

uly

- Jun

e)

2012

-13

151.

117

0.9

122.

212

3.0

142.

724

8.3

192.

723

7.8

220.

020

13-1

415

3.0

206.

412

8.4

124.

414

7.3

262.

122

4.9

281.

624

8.7

2014

-15

155.

621

4.1

136.

612

7.5

152.

327

5.2

216.

629

7.9

261.

520

15-1

6*15

8.7

233.

113

8.4

127.

715

3.3

277.

518

3.0

321.

927

1.4

2012

Ja

nuar

y13

9.5

135.

711

5.9

123.

613

7.9

236.

616

7.8

198.

518

7.3

Febr

uary

140.

113

5.7

115.

912

4.0

138.

023

6.6

167.

819

7.4

191.

8M

arch

141.

113

5.7

116.

212

2.8

138.

423

6.6

167.

820

2.2

197.

3Ap

ril14

2.3

135.

711

8.9

122.

113

8.3

236.

616

7.8

205.

719

5.4

May

142.

413

5.7

118.

712

2.6

138.

323

6.6

167.

820

3.4

195.

6Ju

ne

144.

316

6.3

117.

912

2.6

140.

724

1.4

167.

819

6.0

199.

7Ju

ly14

8.3

166.

312

0.4

122.

714

0.7

241.

416

7.8

208.

419

9.7

Augu

st14

9.1

166.

312

1.0

122.

914

0.9

241.

416

8.6

217.

819

9.7

Sept

embe

r15

0.5

166.

312

2.1

122.

914

1.2

241.

418

2.8

228.

120

1.8

Oct

ober

150.

716

6.3

122.

112

3.0

141.

524

1.4

192.

323

6.1

209.

3N

ovem

ber

151.

016

6.3

122.

112

3.1

142.

424

1.4

192.

323

9.6

214.

3De

cem

ber

152.

116

6.3

122.

312

3.0

143.

725

3.3

192.

323

7.5

225.

220

13

Janu

ary

152.

616

6.3

123.

012

3.0

143.

725

3.3

198.

824

1.9

225.

2Fe

brua

ry15

2.5

166.

312

2.9

123.

514

3.7

253.

320

2.7

246.

223

1.1

Mar

ch15

2.3

166.

312

2.5

123.

114

3.7

253.

320

1.7

250.

423

2.2

April

152.

418

4.8

122.

012

3.0

143.

725

3.3

202.

324

6.0

233.

8M

ay15

1.5

184.

812

3.0

122.

914

3.7

253.

320

3.4

244.

223

3.3

June

15

0.5

184.

812

3.5

122.

914

3.7

253.

320

7.0

257.

123

4.1

July

151.

518

4.8

123.

612

3.1

143.

725

3.3

212.

026

5.3

238.

2Au

gust

152.

020

3.0

124.

512

3.8

143.

825

3.3

215.

426

7.6

237.

7Se

ptem

ber

152.

420

6.9

125.

712

3.9

144.

326

3.9

219.

827

0.1

238.

8O

ctob

er15

2.7

209.

112

7.7

124.

114

4.7

263.

922

0.4

270.

723

8.4

Nov

embe

r15

2.8

209.

112

7.9

124.

114

4.7

263.

922

2.4

274.

123

9.0

Dece

mbe

r15

2.6

205.

512

7.5

124.

314

5.0

263.

922

5.0

278.

324

6.6

(Con

tinue

d)

632 0 1 7 - 1 8 S U G A R S E A S O N

Anne

x Ta

ble

5.2:

Far

m In

puts

- Who

lesa

le P

rice

Inde

x (B

ase

2004

-05=

100)

Mon

th/Y

ear

Fer

tilis

ers

Ele

ctric

ity

(Irrig

ation

) P

estic

ides

Non

-Ele

ctric

al

Mac

hine

ryTr

acto

rs L

ubric

ants

High

Spe

ed

Dies

el (H

SD)

Fod

der

Catt

le

Feed

2014

Ja

nuar

y15

3.0

205.

512

7.2

124.

314

9.0

263.

922

6.6

285.

524

4.9

Febr

uary

152.

920

5.5

128.

212

4.4

149.

626

3.9

228.

629

9.0

251.

4M

arch

153.

121

1.3

130.

512

4.4

150.

126

3.9

231.

231

6.8

259.

4Ap

ril15

4.4

212.

113

0.6

124.

515

0.8

263.

923

0.1

296.

526

3.4

May

154.

321

2.1

131.

712

4.5

150.

826

3.9

232.

327

5.6

263.

7Ju

ne

154.

221

2.1

135.

212

6.8

150.

926

3.9

235.

228

0.0

262.

8Ju

ly15

4.4

211.

313

5.4

127.

315

1.4

263.

923

8.8

277.

626

2.8

Augu

st15

4.2

211.

313

5.4

127.

115

1.5

263.

924

0.4

285.

926

2.8

Sept

embe

r15

4.6

211.

513

7.2

127.

215

2.0

275.

224

2.0

308.

426

2.2

Oct

ober

154.

921

1.5

136.

612

7.3

152.

327

7.8

239.

231

3.5

264.

7N

ovem

ber

155.

421

1.5

136.

312

7.3

152.

227

7.8

218.

131

8.3

262.

1De

cem

ber

155.

321

1.5

137.

012

7.3

152.

127

7.8

210.

832

2.4

260.

320

15

Janu

ary

155.

321

1.5

138.

612

7.8

152.

227

7.8

200.

731

9.6

262.

9Fe

brua

ry15

5.6

217.

913

8.1

127.

915

2.3

277.

818

8.4

306.

626

2.9

Mar

ch15

6.3

217.

913

6.7

127.

515

2.9

277.

520

3.2

286.

126

2.7

April

156.

121

7.9

135.

912

7.6

153.

027

7.5

195.

627

7.4

261.

1M

ay15

6.7

217.

913

6.2

127.

615

3.0

277.

520

9.6

274.

925

7.5

June

15

7.8

217.

913

6.1

127.

615

3.0

277.

521

2.0

283.

525

6.4

July

158.

224

3.5

136.

512

7.5

153.

027

7.5

200.

829

6.2

258.

4Au

gust

158.

324

3.5

136.

412

7.4

153.

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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 Andhra Pradesh Karnataka Maharashtra2014-15 2013-14 2014-15 2013-14 2014-15 2013-14

Operational Cost 105736.17 53949.59 73315.20 71436.36 143965.79 121180.88Human 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 49022.06Bullock 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 5906.02Machine 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 20259.99Seed 14084.38 2237.08 11052.66 5023.89 9034.64 5615.31Fertilisers 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 22591.92Insecticides 789.20 0.00 119.96 151.28 782.94 377.69Irrigation Charges 3530.91 1976.23 3522.89 2516.90 16727.16 11037.87Interest on Working Capital 5364.52 2475.54 3667.21 3321.03 7185.05 6370.02Miscellaneous 0.00 0.00 0.00 0.00 0.00 0.00Fixed Cost 57831.63 52097.41 44905.30 42270.94 49398.71 49750.12Rental Value of Owned Land 50491.14 49450.49 36062.55 37405.00 33276.51 41340.93Rent Paid for Leased-in Land 2203.12 0.00 0.00 0.00 0.00 0.00Land Revenue, Cesses & Taxes 0.00 0.00 24.11 10.75 274.80 265.84Depreciation on Implements & Farm Buildings

297.04 471.59 320.12 713.32 1249.00 915.05

Interest on Fixed Capital 4840.33 2175.33 8498.52 4141.87 14598.40 7228.30Total Cost 163567.80 106047.00 118220.50 113707.30 193364.50 170931.00

(Contd..)

652 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 2013-14Operational Cost 123398.90 120013.11 52322.23 46941.32 44578.20 48359.70Human 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 27393.85Bullock 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 1022.24 131.03 671.28Machine 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 2187.56Seed 5798.43 4287.86 4734.35 6486.15 6972.70 9539.02Fertilisers 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 3789.50Insecticides 674.78 454.65 388.18 474.96 108.04 235.69Irrigation Charges 7708.47 4667.95 7184.92 4955.23 3342.36 2674.84Interest on Working Capital 6061.11 5959.75 2116.27 1973.80 2123.62 1843.94Miscellaneous 0.00 0.00 0.00 1.00 0.00 24.02Fixed Cost 37493.10 37637.89 45594.86 39184.46 47491.03 27930.10Rental Value of Owned Land 26551.58 30087.23 36642.05 33211.37 39347.08 23652.45Rent Paid for Leased-in Land 57.87 0.00 428.11 50.76 0.00 0.00Land Revenue, Cesses & Taxes 11.62 6.71 13.45 24.99 17.76 19.67Depreciation on Implements & Farm Buildings

658.43 738.03 1685.40 936.78 1071.43 878.70

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)