RAMESH CHAND COMMITTEE ON SUGARCANE PRICING

Why In News?

The Ministry of Consumer Affairs, Food and Public Distribution constituted a high-level committee under Prof. Ramesh Chand, former Member of NITI Aayog, to address challenges in the sugarcane sector.

Terms of Reference (ToR) of the Ramesh Chand Committee

Remunerative Returns to Sugarcane Farmers: Examine demands for higher remunerative returns (with farmers demanding up to ₹5,500/tonne) by evaluating cultivation costs, input inflation, and farm income requirements.

Revision of Ex-Mill Minimum Selling Price (MSP) of Sugar: Review the demand from sugar mills to revise the ex-mill Minimum Selling Price (MSP) of white sugar—which has remained frozen at ₹31/kg since 2019—in relation to rising production costs, market realisations, Fair and Remunerative Price (FRP) hikes, and mill financial viability.

Sugar Recovery Testing and Verification: Inspect existing mechanisms for measuring and reporting sucrose recovery rates and recommend protocols for independent verification, accuracy, and operational transparency.

Sugarcane Weighment Practices: Review weighbridge calibration, inspection, and verification practices at sugar processing factories to eliminate weighing errors and farmer grievances.

Deductions on Mechanised Harvesting: Evaluate weight deductions imposed by mills on mechanically harvested sugarcane and assess the actual weight loss or extraneous material attributable to machine harvesting.

Financial Impact on Farmers: Assess how current procurement, recovery testing, and weighment deduction practices affect the net cane price payable to growers.

Actionable Policy Recommendations: Formulate corrective policy measures specifying required administrative and statutory interventions by the Central Government, State Governments, and regulatory authorities.

Sugarcane Sector in India 

Socio-Economic Importance: Sugarcane is India's second-largest agro-based industry after cotton.

• It directly supports 5 crore sugarcane farmers (comprising 7.5% of the rural population) and provides direct employment to 5 lakh factory workers alongside millions of farm laborers and transport workers. (Source: NITI Aayog)

Global and Domestic Position: India ranks as the world’s second-largest producer of sugarcane (after Brazil) and the largest consumer of sugar globally.

• Production Metrics (2025–26): National sugarcane output reached 500 MMT across 58.87 lakh hectares of cultivated land, marking a 43.5% growth over 2015–16 production levels (348.44 MMT). (Source: PIB)

Statutory Pricing (2026–27 Season): The Cabinet Committee on Economic Affairs (CCEA) approved a Fair and Remunerative Price (FRP) of ₹365/quintal linked to a 10.25% sugar recovery rate.

Regional Dynamics & Disparities: 

• Sub-Tropical Belt (North): Uttar Pradesh leads nationally in area (23.0 lakh ha, 40% of national total) and output (188.26 MMT), but records lower yield (81.5 tonnes/ha) and lower irrigation requirements (57.2 cm). (Source: NITI Aayog) 

• Tropical Belt (South & West): Maharashtra (13.72 lakh ha, 131.6 MMT output) and Tamil Nadu (highest national productivity at 104.5 tonnes/ha) achieve superior yields, but require substantially higher irrigation (206–297 cm).  (Source: NITI Aayog)

What is the Structural Pricing Dilemma in the Sugar Sector?

The Indian sugar sector suffers from a fundamental structural pricing mismatch created by rigid statutory mandates on input costs versus frozen realisations on output prices:

• Input Cost Inflation vs Output Price Freeze: The central Fair and Remunerative Price (FRP) has doubled over the past decade to ₹365/quintal for 2026–27. However, the ex-mill Minimum Selling Price (MSP) of white sugar set by the Department of Food and Public Distribution (DFPD) has remained frozen at ₹31/kg since 2019.

• Dominance of Cane Cost in Processing: Sugarcane procurement accounts for 70%–75% of a mill's total cost of sugar production. Because sugar manufacturing costs average ₹35.80–₹36/kg, selling sugar at or near the ₹31/kg MSP creates severe cash flow deficits.

• FRP vs State Advised Price (SAP) Conflict: States like Uttar Pradesh, Punjab, and Haryana enforce an independent statutory State Advised Price (SAP) higher than the central FRP. This uncoordinated pricing inflates mill operating costs, distorts regional competition, and prompts cross-border cane diversion (e.g., Karnataka growers transporting cane to Maharashtra mills for higher payouts).

• Statutory Payment Timing Mismatch: Under the Sugarcane (Control) Order, 1966 (issued under Section 3 of the Essential Commodities Act, 1955), mills must clear farmer dues within 14 days of delivery. However, sugar sales revenue is realised gradually over a 12-month cycle, leading to recurring payment arrears (which historically exceeded ₹20,000 crore nationally and reached ₹3,500 crore in Karnataka in 2025–26).

Key Challenges in the Sugarcane Sector

High Water Footprint & Ecological Strain: Sugarcane is a water-guzzling crop requiring 1,500–2,000 litres of water to produce 1 kg of sugar. Agriculture uses 70% of national irrigation on paddy and sugarcane combined. In drought-prone tropical belts like Maharashtra and Karnataka, excessive flood irrigation severely depletes groundwater tables.

Productivity & Yield Stagnation: National yield improvements have flattened, with production growth in major districts like Bagalkote (Karnataka) driven almost entirely by acreage expansion rather than per-hectare productivity gains.

Measurement Opacity & Deduction Grievances: Inaccurate weighbridge calibration, unverified sucrose recovery determinations, and arbitrary weight deductions (3%–5%) on mechanically harvested cane reduce net farmer realisations.

International Price Uncompetitiveness: High domestic cane prices push Indian sugar production costs to $550/tonne (₹36/kg), compared to $345/tonne in Brazil and Thailand (where cane costs average 25–27/tonne vs. India's $42.30/tonne). This leaves Indian exports uncompetitive without government subsidies, which face challenges at the World Trade Organization (WTO).

Climate Vulnerability & Pest Outbreaks: Recurrent droughts, heatwaves, and outbreaks of red rot disease and shoot borers disrupt crop yields and lower sugar recovery rates.

Way Forward

Implement the Revenue Sharing Formula (RSF): Transition from fixed statutory pricing to the Dr. C. Rangarajan Committee RSF model (updated by the NITI Aayog Task Force to a 75:25 or 80:20 revenue split between growers and mills). 

• Establish a Price Stabilisation Fund (PSF) funded by a sugar cess or beverage tax to reimburse farmers via Direct Benefit Transfer (DBT) whenever market-determined prices fall below the FRP.

Staggered Cane Payment Mechanism: Permit mills to pay 60% of cane dues upfront within 14 days—which fully covers the farmer's A2+FL cost of cultivation—and stagger the remaining 40% in two installments over 60 days, supported by concessional soft loans from the Sugar Development Fund (SDF).

Scale Up the Ethanol Blended Petrol (EBP) Programme: Accelerate the diversion of surplus sugarcane juice, syrup, and B-heavy molasses under the National Policy on Biofuels (2018) to achieve the 20% ethanol blending target (E20) by 2025–26. This absorbs 30–40 LMT of surplus sugar annually, improves mill cash liquidity, and ensures timely payments to growers.

Mandate Micro-Irrigation & Sustainable Farming: Enforce micro-irrigation (drip/sprinkler) for sugarcane landholdings exceeding 3 hectares in tropical belts. 

• Drip irrigation saves 40%–50% water while boosting crop yield by 30%. Promote low-cost agronomic practices like Zero Budget Natural Farming, which reduces cultivation costs to ₹2,24,545/ha compared to ₹2,55,588/ha under conventional methods.

Conclusion

Harmonizing sugarcane pricing through a dynamic Revenue Sharing Formula, scaling ethanol diversion, and mandating water-efficient drip irrigation are essential to securing long-term solvency for mills and sustainable livelihoods for 5 crore sugarcane farmers.

Source: PIB