Sugar Pricing

price policy
for
sugarcane
2015-16 Sugar Season
Commission for Agricultural Costs and Prices

Department of Agriculture and Cooperation
Ministry of Agriculture
Government of India
New Delhi
August 2014
price policy for
sugarcane

Government of India
New Delhi
August 2014
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Dr. Ashok Vishandass Chairman
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Tel: 011-23385216 CACP,
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Fax: 011-23383848 Government of India
Government of India
Department of Health and Family Welfare
Email: vishandass@nic.in
Anuradha Gupta, IAS Ministry ofKrishi
HealthBhawan, New
and Family Welfare
Additional Secretary & Delhi-110001
Nirman Bhawan, New Delhi - 110011
Mission Director, NRHM
Telefax : 23062157
E-mail : anuradhagupta@outlook.com
Preface and Acknowledgements

FOREWORD
The report entitled PriceThe Policy for Sugarcane:

successful 2015-16
implementation of Sugar
NRHMSeason
since itsis launch
brought out inis pursuance
is 2005 of the
clearly evident by the
mandate of the Commission for many fold increase
Agricultural inand
Costs OPD, IPD (CACP).
Prices and otherWhile
relevant services being
recommending fairdelivered in the Public
and remunerative
prices (FRP) of sugarcane forhealth institutions,
the ensuing sugarhowever, theCommission
season, the quality of services
has takenbeinginto
delivered
accountstill remains
several an issue.
factors,
ranging from cost of productionThe offered services
of sugarcane to should notsugar.
prices of only In
be doing
judgedthis,
by its
thetechnical
Commissionquality
hasbut also from
delved into the
perspective of service seekers. An ambient and bright environment where
several inter-related issues such as explicitly linking prices of cane (FRP) with prices of sugar, water productivity the patients
are production),
(intake of water per kg. of sugar received withland dignity and respect
productivity andalong
farm with prompt care
mechanization are some of
necessitated duethetoimportant
high
factors of judging quality from the clients perspective.
cost of labour as a percent of the total cost of production of cane. Given that sugarcane is a water guzzling crop,
appraising water productivity might lead to production of more sugar per drop of water by formulating suitable
Till now most of the States approach toward the quality is based on accreditation of Public Health Facilities by
pricing policy of water to reflect its scarcity.
external organizations which at times is hard to sustain over a period of time after that support is withdrawn.
Quality can only be sustained, if there is an inbuilt system within the institution along with ownership by the
I take this opportunity to express my gratitude to sugarcane farmers, millers, senior officers from Central and
providers working in the facility As Aristotle said Quality is not as act but a habit
States Governments and also several Associations who provided valuable insights into various aspects of cane-
sugar value chain.
Quality Assurance (QA) is cyclical process which needs to be continuously monitored against defined standards
and measurable elements. Regular assessment of health facilities by their own staff and state and action-
This report is the nectar of enormous analyses undertaken by the Commission level officers, ably supported
planning for traversing the observed gaps is the only way in having a viable quality assurance prgramme in
by Advisers, Director, Joint Director and other officers/staff. Their contribution to this report is no less than that of
Public Health. Therefore, the Ministry of Health and Family welfare (MOHFW) has prepared a comprehensive
mine.
system of the quality assurance which can be operationalzed through the institutional mechanism and platforms
of NRHM. is of the considered opinion that the recommendations contained in this report would steer
The Commission
sugar price policy towards greater stability and will go a long way in putting it on a higher trajectory of growth.
I deeply appreciate the initiative taken by Maternal Health division and NHSRC of this Ministry in preparing
these guidelines after a wide range of consultations. It is hoped that States Mission Directors and Programme
Officers will take advantage of these guidelines and initiate quick and time bound actions as per the road map
placed in the guidelines. (Dr. Ashok Vishandass)
14th August, 2014
(Anuradha Gupta)
price policy for sugarcane
v
CONTENTS
S. No. Description Page
Contents
Preface and Acknowledgements iii
Acronyms vii
List of Tables ix
List of Charts x
List of Annex Tables xi
Maps xi
Summary of Recommendations xiii
Price Policy Recommendations xv
Non-Price Recommendations xvi
1. Overview 1
Domestic Production 1
Outlook for 2014-15 3
Sugarcane Pricing 3
Mounting Cane Arrears 4
Recent Initiatives 5
Global Outlook 5
Structure of the Report 6
2. Demand Supply Situation and Price Policy 7
Domestic Market Scenario 7
Sugarcane Pricing Policy 9
Hybrid Approach : Revenue Sharing Formula with FRP 12
Recapitulation 13
vi
price policy for
sugarcane
3. Trade Competitiveness of Indian Sugar 14

Global Scenario: Production and Trade in Sugar 14
Indias Trade in Sugar 15
Trade Policy 17
Global Outlook 18
Recapitulation 19
4. Costs, Returns and Inter-Crop Price Parity 20
Costs and Profitability of Sugarcane during 2010-11 to 2012-13 21
Labour and Input Price Movement 21
Cost Projections of Sugarcane for the 2015-16 Sugar Season 24
Inter Crop Price Parity 25
Recapitulation 26
5. Productivity : Different Dimensions 27
Productivity Overview 27
Productivity Performance over Five Year Plan Periods 27
Water Productivity : Adjusted for Time, Water Intake, Recovery Ratio 29
Contents
State-wise Productivities of Sugarcane 31

Productivity of Sugarcane in Tropical and Sub-Tropical Regions 32
District-wise and State-wise Productivity Levels in Major Sugarcane Producing States 32
Relationship Between Real Cost and Yield Levels 34
Benchmarking 35
Recapitulation 37
6. Recommendations for Price Policy 39
vii
List of Acronyms
List of Acronyms
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
CF Correction factor
CoP Cost of Production
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 Department of Agriculture and Cooperation
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
EC Act Essential Commodities Act
FAI Fertilizer Association of India
FAO Food and Agriculture Organization
FOB Free on Board
FPS Fair Price Shop
viii
price policy for
sugarcane
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
ISEC Indian Sugar Exim Corporation
ISGIEIC Indian Sugar and General Industry Export Import Corporation Ltd.
ISMA Indian Sugar Mills Association
LDO Light Diesel Oil
LIFFE London International Financial Futures and Options Exchange
LPA Long Period Average
MFRP Minimum Fair and Remunerative Price
List of Acronyms
Mn Million
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
OEA Office of Economic Adviser
OGL Open General License
PRSF Prices determined by Revenue Sharing Formula
Q1, Q2, Q3, Q4 Quarters referring to Sugar Season (Oct-Sept)
Qtl Quintal
RC Recovery Certificates
RCAC Registration-cum-Allocation Certificate
RIP Retail Issue Price
RSF Revenue Sharing Formula
SAP State Advised Price
SDF Sugar Development Fund
SMP Statutory Minimum Price
TE Triennium Ending
TFP Total Factor Productivity
TRP Total Revenue Pot
USDA United States Department of Agriculture
w.e.f with effect from
WPI Wholesale Price Index
WTO World Trade Organization
ix
List of Tables
List of Tables
Page
Table No. Topic
No.
Table-1.1 Cane Price Arrears, 2008-09 to 2013-14 5
Table-2.1 Balance Sheet of Sugar (Sugar Season-October to September) 9
Table-2.2 SMP/FRP as a Percentage of Value of Sugar -All India 11
Table-2.3 Cane Prices Paid To Farmers in UP as a Percentage of Value of Sugar 12
Table-3.1 Forecast for International Prices of Sugar 19
Table-4.1 Gross and Net Returns of Sugarcane (Average from 2010-11 to 2012-13) 21
Table-4.2 Projected Costs of Sugarcane for 2015-16 Sugar Season 24
Table-4.3 Inter-Crop Price Parity in Returns 26
Table-5.1 District-Level Yield-bands of Sugarcane in Major Producing States, 2013-14 33

x
price policy for
sugarcane
List of Charts
List of Charts
Chart No. Topic Page No.

Chart-1.1 Production of Sugarcane and Sugar in India, 2000-01 to 2013-14 1
Chart-1.2 State-wise Change in Shares in Production of Sugarcane and Sugar 2
Chart-1.3 FRP for Sugarcane, 2009-10 to 2014-15 Sugar Season 4
Chart-2.1 Sugarcane Crushed and Sugar Output, 2007-08 to 2012-13 8
Chart-2.2 Rising Cane Arrears, 2008-09 to 2013-14 10
Chart-3.1 Major Producers of Sugar, TE 2013-14 14
Chart-3.2 Major Exporters and Importers of Sugar, TE 2013-14 15
Chart-3.3 (a) Indias Exports of Sugar, 2002-03 to 2013-14 16
Chart-3.3 (b) Indias Imports of Sugar, 2002-03 to 2013-14 16
Chart-3.4 International Prices versus Domestic Wholesale Prices of Sugar 18
Chart-4.1 Growth in Wage Rates of Agricultural Labour in Nominal Terms (March, 2014 over March, 2013) 22
Chart-4.2 Share of Major Inputs in Total Cost of Production (C2) 23
Chart-4.3 Movements in Prices of Farm Inputs (May, 2014 over May, 2013) 23
Chart-4.4 Supply Curve and Projected Cost of Sugarcane for 2015-16 Sugar Season 25
Chart-5.1 Growth of Area, Production and Productivity of Sugarcane, Five Year Plan Period-wise 28
Chart-5.2 Production and Productivity of Sugarcane 29
Chart-5.3 Water Consumption Per Kg of Sugar Production, TE 2012-13 30
Chart-5.4 State-wise Productivities of Sugarcane 31
Chart-5.5 Productivities of Tropical, Sub-tropical and Average All India Regions 32
Chart-5.6 Relationship between Cost of Production and Productivity of Sugarcane for Tropical Region 35
Chart-5.7 Benchmarking: Sugarcane Productivity, Production Shares Efficiency, TE 2012-13 36
Chart-5.8 Temporal Movements in Efficiency Gaps 37
xi
List of Annex Tables
List of Tables
Table No. Topic Page No.
Table-1.1 Sugarcane - Area, Production and Yield 44
Table-1.2 State-wise Production of Sugar 46
Table-2.1 Average Recovery of Sugar from Sugarcane 47
Table-4.1 Month-wise Average Daily Wage Rates for Agricultural Labour (Man) 48
Table-4.2 Farm Inputs - Wholesale Prices Index (Base 2004-05=100) 50
Table-4.3 Projected Cost of Production (C2 and A2+FL), 2015-16 Sugar Season and Production Shares 52
Table-4.4 Sugarcane - Break-up of Cost of Cultivation 53
Table-5.1 All India Average Annual Growth Rates of Sugarcane, 1992-97 to 2013-14 55
Table-5.2 Water Productivity- Consumption of Water Per Kg of Sugar Produced, TE 2013-14 56
Table-5.3 Benchmarking Sugarcane Productivity, Production Shares and Efficiency Gaps 58
Maps
District-wise Map of States
1. Andhra Pradesh 60
2. Karnataka 61
3. Maharashtra 62
4. Tamil Nadu 63
5. Uttar Pradesh 64
xiii
Summary of
Recommendations
Summary of
Recommendations
Price Policy Recommendations

S.1 The Commission recommends a fair and remunerative price (FRP) for sugarcane for 2015-16
sugar season to be Rs 230/qtl. at 9.5 percent recovery level. With every increase in recovery by
Summary of Recommendations
0.1 percentage point, the FRP will increase by Rs. 2.42/qtl. All India average recovery rate being
10.05 percent, the FRP recommended would come to Rs. 243/qtl. This FRP is recommended
after carefully considering the statutory factors listed in the Sugarcane Control Order, 1966,
as amended from time to time. These include cost of production of sugarcane, prices of sugar
and by-products, reasonable margins for growers of sugarcane on account of risk and profits,
the return to the growers from alternative crops, the general trend of prices of agricultural
commodities, the availability of sugar to the consumers at a fair price and the recovery of sugar
from sugarcane. The Commission projects that for the 2015-16 sugar season, the A2+FL cost of
production of sugarcane would be Rs 132/qtl and the C2 cost (inclusive of cost of transportation,
marketing and insurance premium) would be Rs 224/qtl at 9.5 percent recovery level. It may be
pointed out here that there is surplus availability of sugar in the country and in the international
markets, the sugar prices are likely to prevail within a range of Rs 3000- 3500 per quintal.
S.2 The Government has taken various initiatives for stimulating the sugar sector by abolishing levy
sugar and monthly release system. Despite this, the cane price arrears due to farmers work out
to Rs. 9635 crore as on 31st July, 2014. Out of this, Uttar Pradesh alone accounts for over 60
percent of the dues. High State Advised Prices (SAP) without any linkage to the sugar price has
led to recurring crisis in the sugar sector. A durable solution to this problem lies in establishing
an explicit link, based on economic principles, between the sugar prices and FRP of cane. One
way to do this is to switch over to a system where farmers be given prices determined by Revenue
Sharing Formula (RSF) or FRP, whichever is higher. This is elaborated in paragraph S.3.
S.3 Under the RSF, the Total Revenue Pot (TRP) generated from the cane-sugar value chain, which is
the value of sugar and its first stage by-products, be shared between the farmers and the millers
in the ratio of their relative costs in producing cane at farm level and converting that cane into
sugar and its by-products at factory level. Based on the Commissions in-depth study undertaken
xvi
price policy for
sugarcane
earlier, this ratio works out to 75:25 at 10.31 recovery rate. However, arrangement under RSF
needs to be aligned with FRP to protect the farmers in the event of any downward movement
in prices of sugarcane. The FRP would serve as the floor price which the farmers would receive
even when sugar prices fall to a level which leads to prices (as determined by RSF, say PRSF)
lower than FRP. The Commission recommends that if PRSF is less than FRP, the difference be
financed by the Sugar Stabilization Fund to be created by the Government.
S.4 Some states such as UP declare SAP for rejected variety also and the price differential between
this variety and common variety of cane was kept just Rs.5/qtl. during 2012-13 and 2013-14.
Such a meager difference in the SAPs of two varieties acts as a disincentive to farmers to adopt
better varieties and demotivates efficient farmers. The Commission recommends that SAP of
rejected variety, if any, be kept at Rs. 20/qtl. lower than that of the common variety. This will help
improve recovery rate and improve overall efficiency.
S.5 Currently stocks of sugar are comfortable and domestic prices are ruling above international
prices. In view of this situation, it is recommended to increase the import duty on sugar from
prevailing 15 percent to 20 percent so as to contain imports.
Non-Price Recommendations
S.6 Water productivity analysis shows that Bihar consumes just 822 litres of water to produce a
kilogram of sugar compared to over 2100 liters in Maharashtra, and more than 2200 liters each
in Andhra Pradesh and Tamil Nadu. Thus, Andhra Pradesh, Maharashtra and Tamil Nadu
consume an additional 1300 to 1400 liters of water over and above what it takes Bihar to produce
a kilogram of sugar. In Maharashtra, sugarcane cultivation, which is on less than 4 percent of
the total cropped area of the state, takes away almost 70 percent of irrigation water in the state.
This leads to massive inequity in the use of water within the state. Future growth of cane in
Maharashtra is likely to be severely hampered by scarce water supplies unless much of sugarcane
is put on drip irrigation or varieties are evolved that use less water. Given that sugarcane is
a water guzzling crop, its long term development must ensure that water pricing policies are
formulated in a manner that reflects its scarcity. Instead of focusing on economy in water use in
agriculture, most state governments have been content with subsidising electricity for pumping
irrigation water. Ensuring economy in water use needs to sink into the consciousness of policy
makers at the Centre and in the states so as to achieve the optimum production of sugar per
drop of water.
xvii
S.7 Disaggregated analysis shows that labour accounts for 32 percent in the total cost of production
of sugarcane (C2). This coupled with high growth in wage rates calls for farm mechanization
on a large scale. 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. Therefore, the situation warrants sugarcane farm
mechanization. Currently, rate of penetration in terms of mechanization is far lower in relatively
small landholdings. Therefore, there is a need to nudge relatively small farmers towards
mechanization in order to reduce operational costs in medium to long term. Equipments such
as Cane Thumper, which is a multi-use power tiller that performs tillage, inter-row cultivation;
and the Sickle Sword for cane cutting be customized to suit relatively small holdings so that it
can harvest cane in small pockets of land under all types of conditions and are easy to handle.
Given the low propensity of farmers to make capital investment, the Commission recommends
to formulate a scheme to lend hand holding to farmers to enable them to go for sugarcane
farm mechanization on a massive scale. In the medium to long run, it will contain the cost of
production, increase the productivity and augment profitability.
S.8 Based on district-wise analysis, Kurnool, Mandya, Sangli, Karur and Bagpat have been identified
as benchmark districts in major sugarcane producing states in the country. These districts need
to be studied in great details so that farming practices and inputs applied in these districts can be
replicated in other districts after having due regard to soil and agro-climatic conditions. This will
help augmenting the overall land productivity and will contain cost of production of the cane
and improve profitability.
S.9 Blending of ethanol with petrol will help farmers getting better prices and would increase
their profitability. This blending is environmental friendly as it is less polluting. It is, therefore,
recommended that blending of ethanol, a by-product of sugarcane, with petrol be increased
from 5 percent to 10 percent in a time bound manner. This will also help in containing imports
of fossil oil.
******************
Chapter - 1
Overview
Domestic Production
1.1 Sugarcane accounted for 6.0 percent of the total value of agriculture output and occupied about
2.5 percent of Indias gross cropped area in 2013-14. It provides raw material for the second largest
agro-based industry of sugar. About 530 sugar factories (in operation) with total installed annual
sugar production capacity of about 31.9 million tonnes operated in the country during 2012-13
sugar season. Sugar and cane production over the years may be seen at Chart-1.1. Sugarcane
production achieved a record of 361.0 million tonnes in 2011-12 after which it declined to 341.2
million tonnes in 2012-13 and then increased to 348.4 million tonnes in 2013-14. Likewise, area
coverage has also fluctuated though the yield levels have remained stagnant over the years. Sugar
Chapter 1
production at 26.3 million tonnes in 2011-12 ebbed to 25.1 million tonnes in 2012-13 and 24.4
million tonnes in 2013-14.
Chart-1.1: Production of Sugarcane and Sugar in India, 2000-01 to 2013-14

400 30
Sugarcane ( Million Tonnes)
350 25
Sugar ( Million Tonnes)

300 20
250 15
200 10
150 5
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013-
01 02 03 04 05 06 07 08 09 10 11 12 13 14
Sugarcane 296 297 287 234 237 281 356 348 285 292 342 361 341 348
Sugar 19 18 20 14 13 19 28 26 15 19 24 26 25 24
Sources: DES and Directorate of Sugar, DFPD
1.2 Agro-climatic regions for sugarcane cultivation in India can be divided into two distinct regions
2
viz., tropical and subtropical. The productivity and the sugar recovery in the tropical regions
is higher than that in the sub-tropical regions as their climatic conditions are more suited for
the cane cultivation. The sub-tropical sugarcane region includes the states of Bihar, Haryana
Punjab, Uttar Pradesh (UP) and Uttarkhand which accounted for 55 percent of the total area
under cultivation and 47 percent of the total production in TE 2013-14. Major cane producing
states in the tropical region are Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Tamil Nadu,
accounted for around 42 percent of total area under cultivation of sugarcane and 51 percent of
the total production in TE 2013-14.
1.3 In terms of sugar production, the tropical regions contributed 63 percent in TE 2013-14.
Maharashtra is the largest producer (32 percent) followed by UP (28 percent), though the share
of UP in the production of cane is the highest at 38 percent. This is partly explained by lower
sucrose
by lower contentcontent
sucrose in the cane produced
in the in UP. Other
cane produced in major producers
UP. Other majorof producers
sugar are Karnataka
of sugarand
are
Tamil Nadu with shares of 15 percent and 7 percent respectively.
Karnataka and Tamil Nadu with shares of 15 percent and 7 percent respectively.
Chart-1.2: State-wise
Chart-1.2: State-wiseShares in Production
Shares in ProductionofofSugarcane
Sugarcaneandand Sugar
Sugar
Overview
(a) Sugarcane (b) Sugar
(a) Sugarcane (b) Sugar
Bihar Others Others
Tamil Uttar
Gujarat 4% 8% 9%
Uttar Nadu Pradesh
4% 7%
Pradesh 28%
Andhra 38%
Karnataka
Pradesh 15%
4%
Tamil Nadu
10%
Andhra
Pradesh
4%
Karnataka Maha
Maha Gujarat 32%
10%
22% 5%
Note: Maha-Maharashtra
Note: Maha-Maharashtra
Outlook for 2014-15

1.4 The cumulative monsoon rainfall for the country till July, 2014 was 24 percent lower than
the Long Period average (LPA). The storage in 85 major reservoirs in the country was 61
percent of the last years and 87 percent of the normal storage. As per latest information
available on sowing of crops, around 98 percent of the normal area under kharif crops
has been sown. Since 92 percent of the area under sugarcane cultivation is under
irrigation (as per DES in 2010-11), the impact of lower rainfall, on sugarcane production
may not be much.
Sugarcane Pricing
1.5 The pricing of sugarcane is governed by the statutory provisions of the Sugarcane
(Control) Order, 1966 issued under the Essential Commodities Act (ECA), 1955. Prior to
3
price policy for
sugarcane
Outlook for 2014-15

1.4 The cumulative monsoon rainfall for the country till July, 2014 was 24 percent lower than the
Long Period average (LPA). The storage in 85 major reservoirs in the country was 61 percent
of the last years and 87 percent of the normal storage. As per latest information available on
sowing of crops, around 98 percent of the normal area under kharif crops has been sown. Since
92 percent of the area under sugarcane cultivation is under irrigation (as per DES in 2010-11),
the impact of lower rainfall, on sugarcane production may not be much.
Sugarcane Pricing
1.5 The pricing of sugarcane is governed by the statutory provisions of the Sugarcane (Control)
Order, 1966 issued under the Essential Commodities Act (ECA), 1955. Prior to 2009-10 sugar
season, the Central Government was fixing the Statutory Minimum Price (SMP) of sugarcane
and farmers were entitled to share profits of a sugar mill on 50:50 basis1. As this sharing of
profits remained virtually unimplemented, the Sugarcane (Control) Order, 1966 was amended
Overview
in October, 2009 and the concept of SMP was replaced by the Fair and Remunerative Price
(FRP) of sugarcane. A new clause reasonable margins for growers of sugarcane on account of
risk and profits was inserted as an additional factor for working out FRP and this was made
effective from the 2009-10 sugar season. Accordingly, the Commission is required to pay due
regard to the statutory factors listed in the Control Order, which are (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 of sugar; (e) the recovery rate of sugar from sugarcane; (f) the realization made from
sale of by-products viz. molasses, bagasse and press mud or their imputed value (inserted in
December, 2008) and; (g) reasonable margins for growers of sugarcane on account of risk and
profits (inserted in October, 2009). The FRP per quintal has increased from Rs. 129.84 in the
2009-10 sugar season to Rs. 220 in the 2014-15 sugar season (Chart-1.3).
1 This sharing provision was introduced in the Control Order as Clause 5A in September, 1974
(inserted in December, 2008) and; (g) reasonable margins for growers of sugarcane on
account of risk and profits (insertedprice
in October,
policy2009).
from Rs. 129.84 in the 2009-10 sugar season to Rs. 220 2015-16
in the 2014-15
sugarcane
forThe FRP per quintal has increased
4
sugar season
Sugar Season
(Chart-1.3).
Chart-1.3: FRP for Sugarcane, 2009-10 to 2014-15 Sugar Season
Chart-1.3: FRP for Sugarcane, 2009-10 to 2014-15 Sugar Season
250
200
Rs/Quintal
150
100
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
SMP/FRP 129.84 139.12 145 170 210 220
Source: Directorate of Sugar, DFPD

Overview
Mounting Cane Arrears
Mounting Cane
1.6 Of late, Arrears
various state Governments have been announcing their own State Advised Prices (SAP,
1.6 Of late,asvarious
in states like UP)Governments
state have
which are usually way been
above announcing
the FRP. This, in turn,their
has ledown State cane
to mounting Advised Prices
(SAP, asarrears
in states
over thelike
last UP) which
two years are usually
(Table-1.1). way
The cane above
arrears were the FRP.
Rs. 9635 This
crores has2014.
in July, contributed to
Uttar Pradesh,
high domestic the largest
inventory ofproducer
sugar,ofcoinciding
sugarcane, alone
withaccounts
global for sugar
more than 60 percent and
surpluses of the continuous
total arrears. This is indicative of increasing inability of the sugar mills to pay the cane farmers
slump inleading
domestic sugar prices which, in turn, has led to mounting cane arrears over the
to brewing discontent among the industry and farmers alike. This clearly signals that the
last twopricing
years. The cane
mechanism payment
of SAP arrears have increased to a record of Rs. 15,209 crore,
is unsustainable.
as on 31st May, 2014, amounting to 27 percent of total cane dues (Table-1.1). However,
situation has eased out subsequently when arrears come down to Rs. 9635 crores in July,
2014. Uttar Pradesh, the largest producer of sugarcane, alone accounts for more than 60
percent of the total arrears. This is indicative of increasing inability of the sugar mills to
pay the cane farmers leading to brewing discontent among the industry and farmers
alike. This clearly signals that the pricing mechanism of SAP is unsustainable.
Table-1.1: Cane Price Arrears, 2008-09 to 2013-14
(Rs. Crores, Percent)
Sugar Position as Total Price Arrears Percent of
Season on price paid Arrears on
payable Price Payable
2008-09 30.4.2009 17732 17023 709 4
2009-10 30.4.2010 35036 32952 2084 6
2010-11 30.4.2011 40495 37323 3172 8
2011-12 30.4.2012 48222 40815 7407 15
2012-13 30.4.2013 57615 46625 10990 19
2013-14 31.5.2014 55669 40460 15209 27
5
price policy for
sugarcane
Table-1.1: Cane Price Arrears, 2008-09 to 2013-14

(Rs. Crores, Percent)
Sugar Season Position as on Total price Price paid Arrears Percent of Arrears
payable on Price Payable
2008-09 30.4.2009 17732 17023 709 4
2009-10 30.4.2010 35036 32952 2084 6
2010-11 30.4.2011 40495 37323 3172 8
2011-12 30.4.2012 48222 40815 7407 15
2012-13 30.4.2013 57615 46625 10990 19
2013-14 31.5.2014 55669 40460 15209 27
2013-14 31.7.2014 57104 47852 9635 17
Recent Initiatives
1.7 Recently, the Central Government has notified a Scheme for Extending Financial Assistance
Overview
to Sugar Undertakings (SEFASU-2014) in January, 2014 which envisages interest free loans
amounting to Rs. 6,600 crore by banks as additional working capital to sugar mills for clearance
of cane price arrears. Out of this, Rs. 5,472 crore has already been released by the first week
of August, 2014. An additional grant of interest-free loans of Rs. 4,400 crore to factories for
settlement of cane dues was announced in June, 2014. To encourage sugar factories to export
raw sugar, in view of high sugar inventories, a scheme was notified in February, 2014 which
allows incentives for marketing and promotion services for raw sugar production targeted for
export markets for 4 million tonnes during the 2013-14 and the 2014-15 sugar seasons from
Sugar Development Fund (SDF). This export incentive has been extended till September, 2014.
An increased provision for blending of a cane by-product viz. ethanol with petrol from 5 percent
to 10 percent has also been made. These measures have been announced with a view to raise
demand for sugar and sugar products and to increase the liquidity of the sugar mills so that they
can clear the cane dues.
Global Outlook
1.8 The Food and Agricultural Organizations (FAO) Sugar Price Index averaged 258 points in June,
2014, down 0.5 percent from May, 2014 but still 6.4 percent up from the last year. International
sugar prices, on a downward trend for most of 2013, recovered modestly by the beginning
6
of 2014, underpinned by drought conditions in Brazil, the worlds largest sugar producer and
exporter. As per FAO, world sugar production is forecast to decline marginally in 2013-14, but
would still be enough to cover projected global consumption and enable a build-up in global
stocks. Early indications for the 2014-15 season indicate that the world sugar market is likely to
be balanced indicating stable prices.
Structure of the Report

1.9 Chapter-2 of this Report analyzes the demand-supply situation of sugar and the existing price
policy for cane. Chapter-3 looks at domestic sugar prices in relation to international prices and
trade policy with a view to build a globally competitive sugar sector. Chapter-4 presents costs,
profitability and the inter-crop price parity for sugarcane. 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-5. Finally, major highlights of all the chapters, leading to the key price and
non-price policy recommendations, are presented in Chapter-6.
Overview
*******
Chapter - 2
Demand Supply Situation
and Price Policy
Domestic Market Scenario
2.1 Sugarcane is the main raw material for production of sugar. Therefore, the prices of sugarcane
are directly linked with prices of sugar. Based on production of sugarcane, sucrose content in
it and the production of sugar, it is estimated that about 70 percent of the sugarcane is used
for production of sugar in the country. Therefore, it is imperative to deepen the understanding
the demand and supply situation of sugar in the country to formulate cogent pricing policy for
sugarcane.
2.2 Domestic demand of sugar primarily arises from direct household consumption and from
Chapter - 2
bulk buyers like beverage companies, confectionaries etc. whereas external demand or export
usually depends on global sugar prices and the availability of surplus after meeting the domestic
requirement. As per the NSSO estimates (68th round), the per capita monthly consumption
of sugar was 777 grams in rural areas and 862 grams in urban areas in 2011-12. The all-India
per capita direct household consumption of sugar, therefore, would be 804 grams per month
and total domestic consumption requirement of sugar for the entire country for 2014-15 would
be 12.30 million tonnes (assuming the estimated population for 2015 at 1.25 billion persons
and that 68.8 percent of population lives in rural areas as per the 2011 Population Census).
The Department of Food and Public Distribution (DFPD) has estimated the total consumption
requirement (household and bulk users of sugar for the sugar season 2013-14 (ending on 30th
September, 2014) at 23.5 million tonnes. The consumption requirement of sugar for the year
2014-15 works out to 24.3 million tonnes at the compound annual growth rate of 3.5 percent
(estimated by DFPD). Considering the Commissions estimate of domestic consumption of
sugar at 12.30 million tonnes, the balance 12 million tonnes would be for bulk consumption.
2.3 Supply of sugar on the other hand depends on the total domestic production and imports of
sugar. Domestic production of sugar depends upon area under sugarcane, its productivity,
and prices that farmers get for the cane. Area under sugarcane production has been around
50 lakh hectares since 2011-12 which was a record production year for sugarcane and sugar
at 361.0 million tonnes and 26.3 million tonnes respectively (Chart-2.1). As per the Third
Advance estimates released by the DAC for the year 2013-14, the production of sugarcane is
8
estimated at 348.3 million tonnes as compared to 341.2 million tonnes in 2012-13. In the 2013-
14, some states like Maharashtra suffered a drought and therefore production of sugarcane was
adversely affected. Also, due to an impasse over cane price between sugar millers and sugarcane
farmers, mills started crushing operations late i.e., in mid- December, 2013 in some major sugar
producing states namely Maharashtra, Karnataka and Uttar Pradesh. Thus, there has been a fall
Demand Supply Situation and Price Policy

in the estimated production of sugar to 24.4 million tonnes in 2013-14 sugar season as compared
to 25.2 million tonnes in 2012-13 sugar season.
Chart-2.1: Sugarcane Crushed and Sugar Output, 2007-08 to 2012-13
Chart-2.1: Sugarcane Crushed and Sugar Output, 2007-08 to 2012-13
300 30
250 25
Million Tonnes
Million Tonnes
200 20
150 15
100 10
50 5
0 0
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Cane Crushed (LHS) 256 145 185 225 256 250
Sugar Production (RHS) 26 15 19 24 26 25
Sources: DES, Directorate of Sugar, DFPD

Sources: DES, Directorate of Sugar, DFPD
2.4 In the light of the above, it may be worth noting that the country has had surplus production of
2.4 Insugar
the since
light2010-11
of the asabove, it may
compared be worthdemand.
to its domestic notingThe that theto country
stock use ratio athas
26.4had surplus
percent
production of sugar asince
in 2013-14 indicates 2010-11
comfortable as compared
position to its domestic
of sugar availability demand.
in the country The
with stock to use
a closing
ratio
stockatof26.4
aboutpercent
7 millionintonnes
2013-14 indicates
of sugar a comfortable position of sugar availability in
(Table-2.1).]
the country with a closing stock of about 7 million tonnes of sugar (Table-2.1).
Table-2.1: Balance Sheet of Sugar
(Sugar Season - October to September)
(Lakh tonnes, Percent)
Sr. Particulars 2011-12 2012-13 2013-14
No. (P)
1 Carryover Stocks with Sugar Mills from previous 63.0 66.9 91.1
season
2 Less - Adjusted 5 percent due to damages/ 0.0 1.0 0.0
unusable stocks
3 Net Opening Stock 63.0 65.9 91.1
4 Export allowed during the previous season but 4.4 0.0 0.0
physically exported during the current sugar
season
5 Net Adjusted opening stock (3-4) 58.6 66.0 91.1
6 Production of Sugar* 263.4 251.8 243.8
7 Imports 0.0 6.8 0.0
8 Estimated Total Availability (5+6+7) 322.0 324.6 334.9
9 Estimated Releases for Internal Consumption 227.3 230.0 240.0
9
price policy for
sugarcane
Table-2.1: Balance Sheet of Sugar

(Sugar Season - October to September)
(Lakh tonnes, Percent)

Sr. No. Particulars 2011-12 2012-13 2013-14 (P)
1 Carryover Stocks with Sugar Mills from previous season 63.0 66.9 91.1
2 Less - Adjusted 5 percent due to damages/ unusable stocks 0.0 1.0 0.0
3 Net Opening Stock 63.0 65.9 91.1
4 Export allowed during the previous season but physically exported 4.4 0.0 0.0
during the current sugar season
5 Net Adjusted opening stock (3-4) 58.6 66.0 91.1
6 Production of Sugar* 263.4 251.8 243.8
7 Imports 0.0 6.8 0.0
8 Estimated Total Availability (5+6+7) 322.0 324.6 334.9
9 Estimated Releases for Internal Consumption 227.3 230.0 240.0
10 Exports 27.8 3.5 25.0
11 Total Estimated Releases (9+10) 255.1 233.5 265.0
12 Estimated Closing Stock on 30th September (8-11) 66.9 91.1 69.9
13 Stock to Use ratio ( percent) {(12/11)*100} 26.3 39.0 26.4
P : Projected
*Production during 2013-14 sugar season is upto 31.05.2014
Sugarcane Pricing Policy

2.5 The Central Government decides the SMP/FRP for sugarcane on the basis of the recommenda-
tion of the Commission as per the SCO, 1966, as amended from time to time. Some major cane
producing states such as UP follow a system of SAP which is usually way above the FRP fixed by
the Central Government. For instance, SAP for sugar season 2013-14 for the common variety
was fixed at Rs. 280/qtl. by Uttar Pradesh against the FRP of Rs. 210/qtl. UP also declares SAP
for rejected variety of sugarcane which was Rs. 275/qtl both during 2012-13 and 2013-14 and
just Rs. 5/qtl less than the SAP for common variety sugarcane. Such meager difference in the
SAPs of common variety and rejected variety of sugarcane makes efforts or research to promote
improved variety redundant and acts as a disincentive to farmers to adopt better varieties.
usually way above the FRP fixed by the Central Government. For instance, SAP for sugar
season 2013-14 for the common variety was fixed at Rs. 280/qtl. by Uttar Pradesh
against the FRP of Rs. 210/qtl. UP also declares SAP for rejected variety of sugarcane
which was Rs. 275/qtl both during 2012-13 and 2013-14 and just Rs. 5/qtl less than the
SAP for common variety sugarcane. Such meager difference in the SAPs of common
price policy for
variety and rejected variety of sugarcane makes efforts or research to promote improved
sugarcane 10
variety redundant and acts as a disincentive to farmers to adopt better varieties.
2.6 Declaring higher SAP by some states compared to the FRP fixed by the Central
2.6 Declaring higher SAP by some states compared to the FRP fixed by the Central Government
Government has
has led to led to increasing
increasing cane arrears.cane arrears.
The arrears The
in the arrears
2013-14 in season,
sugar the 2013-14 sugar
as on 31st July, season,
2014,
st
as on 31 July, 2014, amounted to Rs. 9635 crore which were 17 percent of the total
amounted to Rs. 9635 crore which were 17 percent of the total cane dues (Chart-2.2). This has cane
dues (Chart-2.2). This
led to a growing hasamong
unrest led the
to farmers.
a growing unrest
The major amongto these
contributor the cane
farmers.
arrearsThe major
has been
UP. to these cane arrears has been UP.
contributor

Chart-2.2: Rising Cane Arrears, 2008-09 to 2013-14
Chart-2.2: Rising Cane Arrears, 2008-09 to 2013-14
12000 25
10000 20
8000
15
Rs Crore
Percent
6000
10
4000
2000 5
0 0
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
Arrears 709 2084 3171 7407 10990 9635
% of Arrears on Price Payable 4 6 8 15 19 17

Source: Directorate
Note: The cane arrearsof
areSugar, DFPD
as on 31st April of each year. For 2013-14 sugar season, the arrears are as on 31st July, 2014
st
Note: The cane arrears are as on 31 April of each year. For 2013-14 sugar season, the arrears are as on
st
31 July,
2.7 2014 decided by the Central Government at all India recovery rate 10.05 percent has shown
SMP/FRP
an upward trend. It is estimated to be over 84 percent of the value of sugar per quintal of sugar-
2.7 The effects
cane inof2014-15
SAP in(Table-2.2).
Uttar Pradesh can be seen by analyzing the SMP/FRP at all India
recovery rate as a proportion of the total value of sugar and SAP in Uttar Pradesh as
proportion of value of sugar. The Commission has been recommending fixation of
SMP/FRP for sugarcane at 75 percent value of sugar as per revenue sharing formula
recommended by this Commission. The revenue sharing formula takes care of the entire
value in the sugar value chain i.e. value of sugar and its by-product viz. molasses, bagasse
and press mud (all ex-mill). SMP/FRP decided by the Central Government at all India
recovery rate 10.05 percent was 80 percent of the value of sugar from one quintal
sugarcane in 2013-14 (Table-2.2). The SMP/FRP decided, therefore, is already above the
ratio recommended by the Commission and therefore should have been acceptable to
the States after adjusting for the recovery rates.
16
11
price policy for
sugarcane
Table-2.2: SMP/FRP as a Percentage of Value of Sugar -All India
Sugar Season All India All India Total Sugar SMP/FRP SMP/FRP at All SMP/FRP as
Ex-Mill Recovery Value from 1 (Rs/qtl) India Recovery percent of value
Sugar Pric- Rate Qtl of Cane Rate of sugar
es (Rs/qtl) (Rs/qtl)
(percent)
(1) (2) (3) (4)=(2)*(3) (5) (6)=(5)*(3)/ Basic (7)=(6)*100/(4)

Recovery Rate
2008-09 2127 10.05 213.76 81.18 90.65 42.41
2009-10 2980 10.20 303.96 129.84 139.41 45.86
2010-11 2659 10.17 270.42 139.12 148.93 55.07
2011-12 3070 10.26 314.98 145.00 156.60 49.72
2012-13 3079 10.05 309.44 170.00 179.84 58.12
2013-14 2747 10.05 276.07 210.00 222.16 80.47
2014-15 (E) 2747 10.05 276.07 220.00 232.74 84.30
Source: Calculated by the Commission based on data from Directorate of Sugar, DFPD
Note: It has been assumed that the prices would remain at the same level in 2014-15 as that in 2013-14
2.8 SAPs in Uttar Pradesh were as high as 93.8 percent in 2012-13 and 102.8 percent in 2013-14 of
the value of sugar at the state recovery rate (Table-2.3). High State Advised Prices (SAP) with-
out any linkage to the sugar price is unviable and therefore unsustainable. This state of affairs
creates problems and leads to litigation. Farmers agitate for non-payment of their arrears on
one hand, and sugar mills face liquidity constraints on the other. A durable solution to this
problem lies in establishing an explicit link, based on economic principles, between the sugar
prices and FRP of cane. One way to address the issue is to adopt hybrid approach i.e. com-
bination of revenue sharing formula (RSF) and FRP, whichever is higher. This is elaborated in
paragraph-2.9.
12
Table-2.3: Cane Prices Paid To Farmers in UP as a Percentage of Value of Sugar
Sugar Ex-Mill Cane State Total Sugar Value from 1 Farmers share in total Cane price pay-
Season Sugar price Recovery qtl. of cane (Rs/qtl) value (Cane price paid able to farmers
Prices paid to Rate to farmers/total sugar under revenue
(Rs/qtl) farmers (percent) value)*100 sharing formula
(SAP) (75 percent of

(Rs/qtl) total sugar value
from 1 qtl. of
cane)
At State At 9.5% At State At 9.5% At 9.5% Recovery
Recovery Recovery Recovery Recovery Rate
Rate Rate Rate Rate
(1) (2) (3) (4) (5)=(2)* (4) (6)=(2)* (7)=(3)* (8)=(3)* (9)=0.75*(6)
9.5 100/(5) 100/(6)
2008-09 2230.83 140.00 8.91 198.77 211.93 70.43 66.06 158.95
2009-10 3121.67 165.00 9.13 285.01 296.56 57.89 55.64 222.42
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 9.20 298.52 308.26 93.80 90.83 231.19
2013-14 2961.00 280.00 9.20 272.41 281.30 102.79 99.54 210.97
Average 81.90 78.63
Source: Calculated by the Commission based on data from Directorate of Sugar, DFPD
Hybrid Approach : Revenue Sharing Formula with FRP

2.9 Under RSF, Total Revenue Pot (TRP) generated from the cane-sugar value chain is calculated
which includes the value of sugar and its first stage by-products namely molasses, bagasse and
press mud. The TRP is then to be shared between farmers and millers in the ratio of their relative
costs in producing cane and converting that cane into sugar and its by-products. According to
a study undertaken by the Commission earlier, share of farmers in the TRP be 75 percent of ex-
mill value of sugar at 10.31 percent recovery rate. This is Revenue Sharing formula (RSF). It may
be noted that TRP depends on mainly sugar prices. As sugar prices fluctuate widely, so will be
farmers realization. When the sugar prices are on an upswing, farmers realizations would also
be higher but when the sugar prices go down, the realization would also be low. To minimize
discontent during downward cycle of the sugar prices, it is recommended that prices of cane be
determined by hybrid approach i.e. by revenue sharing formula or FRP whichever is higher. That
is to say that farmers be given FRP even if prices determined by RSF (say, PRSF) go below FRP.
For this purpose, a Sugar Stabilization Fund be created. This Fund would be the source of the
subsidy to the farmers during the downward swings faced by the sugar industry.
13
price policy for
sugarcane
Recapitulation
2.10 The abnormally high SAPs by some states without regard to prices of sugar have led to accu-
mulation of high cane arrears due to the farmers. The solution to this problem lies in moving
to hybrid approach i.e. switching over to revenue sharing formula or FRP whichever is higher.
Based on the Commissions in-depth analysis of the sugar recovery rate, cost of producing cane
by farmers and cost of converting cane into sugar and its by-products, the farmers be given 75
percent of the value of sugar (at 10.31 percent recovery rate). Since the sugar prices can be very
volatile, revenue sharing formula can bring in much uncertainty about sugarcane pricing for
farmers. The FRP would serve as the floor price which the farmers would receive even when
sugar prices fall to a level which leads to prices (as determined by RSF, say PRSF) lower than
FRP. The Commission recommends that if PRSF is less than FRP, the difference be financed by
the Sugar Stabilization Fund to be created by the Government.
*************
Chapter - 3
Trade Competitiveness
of Indian Sugar
Global Scenario: Production and Trade in Sugar
3.1 Sugarcane and sugar beet are the main sources of sugar. Sugarcane is cultivated in tropical and
sub-tropical climates while sugar beet is cultivated in temperate climates. As per FAO, global
production of sugarcane was 1.79 billion tonnes in TE 2012. Brazil is the leading producer of
sugarcane with a share of 40.5 percent followed by India (18.3 percent). Other major producers
of sugarcane are China (6.5 percent), Thailand (4.9 percent), Pakistan (3.0 percent) and Mexico
(2.8 percent). As per FAO, global production of sugar beet was 0.26 billion tonnes in TE 2012.
European Union is the largest producer of sugar beet with a share of 44.5 percent followed by
Russia (14.8 percent), USA (11.2 percent), Ukraine (6.6 percent) and Turkey (6.3 percent).
Chapter - 3
3.2 Global production of sugar, as per USDA, was 175.1 million tonnes in TE 2013-14 out of which
31.5 percent is traded. Brazil is the biggest producer of sugar with a share of 21.4 percent followed
by India (15.8 percent) in TE 2013-14 (Chart-3.1). Other major producers of sugar are European
Union (9.7 percent), China (7.7 percent), Thailand (6.0 percent), USA (4.5 percent) and Mexico
(3.7 percent) in TE 2013-14.
Chart-3.1: Major Producers of Sugar, TE 2013-14

India
15.8%
Brazil
21.4% EU
9.7%
China
7.7%
Other
31.1% Thailand
6.1%
USA
Mexico 4.5%
3.7%
Source: USDA
Thailand China EU
13.4% Australia Other 8.1% 7.3%
5.5% Indonesia
37.1%
India 6.9%
3.5% USA
Mexico 6.1%
3.4%
UAE
EU 4.6%
3.3% Canada Malaysia
2.3% 3.7%
Guatemala Korea
Egypt
3.3% 2.5% Algeria South
Brazil Saudi 3.6% 3.6%
Japan
47.5% Other Arabia Iran Nigeria Bangladesh
2.6%
20.2% 2.7% 2.7% 2.9% 3.4%
15
price policy for
2015-16 Sugar
BrazilSeason
sugarcane India
15.8%
21.4% EU
9.7%
3.3 As per USDA, global export of sugar in TE 2013-14 China

was 55.1 million tonnes. Brazil is the single
7.7%
biggest exporter of sugar in the world with 47.5 percent share in TE 2013-14 (Chart-3.2). Other
Other
major exporters of sugar are Thailand (13.4 percent),
Thailand Australia (5.5 percent), India (3.5 percent)
31.1%
6.1%
and Mexico (3.4 percent). China is the biggest importer of sugar in the world with a share of
USA
8.1 percent followed by European Union (7.3 percent)
Mexico 4.5% in TE 2013-14 (Chart-3.2). Other major
importers of sugar are Indonesia (6.9 percent), USA (6.1 percent) and UAE (4.6 percent) in TE
3.7%
Trade Competitiveness of Indian Sugar
2013-14.
Chart-3.2: Major Exporters and Importers of Sugar, TE 2013-14

Export Import
Thailand China EU
13.4% Australia Other 8.1% 7.3%
5.5% Indonesia
37.1%
India 6.9%
3.5% USA
Mexico 6.1%
3.4%
UAE
EU 4.6%
2.3% 3.7%
Guatemala Korea
Egypt
3.3% 2.5% Algeria South
Japan
2.6%
20.2% 2.7% 2.7% 2.9% 3.4%
Source: USDA
Indias Trade in50Sugar 10000

45 9000
40 8000
3.4 As per DGCIS, Indias exports of sugar were 26.6 lakh tonnes, whereas its imports were only 7.0
35 7000
lakh tonnes in30TE 2013. India has been generally a net exporter of sugar. However, it has been
Lakh Tonnes
6000
Rs.Crore
occasional net25importer of sugar depending upon demand and supply situation 5000in the country.
During the period from 2002-03 to 2013-14, India has been a net exporter of sugar,
20 4000 except during
15 3000
2004-05, 2005-06 and 2009-2010 when it was a net importer of sugar [Chart-3.3 (a) and (b)].
10 2000
During this period,
5
Indias exports of sugar were highest in the year 2007-08 (46.8 1000
lakh tonnes)
and lowest in 2009-10
0 (0.4 lakh tonnes), whereas, imports of sugar were highest 0 in the year
2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013-
2009-10 (25.5 lakh 03tonnes)04 and
05 lowest
06 07in 2007-08
08 09 (negligible).
10 11 12 This
13 is because
14 of fluctuations
Quantity 17 12 1 3 16 47 33 0 17 27 28 25
in sugarcane production in India, which is influenced by performance of monsoon, despite the
Value 1770 1217 150 569 3127 5412 4449 110 5419 8767 8577 7136
sugarcane crop having irrigation coverage of 93 percent in the country.
3.5% USA
Mexico 6.1%
3.4%
UAE
EU 4.6%
2.3% 3.7%
price policy
Guatemala
3.3%
Egypt
for
2.5%
sugarcane Algeria
Korea
South 16
Japan
2.6%
20.2% 2.7% 2.7% 2.9% 3.4%
Chart-3.3 (a): Indias Exports of Sugar, 2002-03 to 2013-14
50 10000
45 9000
40 8000
35 7000
Lakh Tonnes
30 6000

Rs.Crore
25 5000
20 4000
15 3000
10 2000
5 1000
0 0
2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013-
03 04 05 06 07 08 09 10 11 12 13 14
Quantity 17 12 1 3 16 47 33 0 17 27 28 25
Value 1770 1217 150 569 3127 5412 4449 110 5419 8767 8577 7136
Source: DGCIS
Chart-3.3(b): Indias Imports of Sugar, 2002-03 to 2013-14

30 7000
25 6000
5000
20
Lakh Tonnes
Rs Crore
4000
15
3000
10
2000
5 1000
0 0
2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013-
03 04 05 06 07 08 09 10 11 12 13 14
Quantity 0.4 0.7 9.3 5.6 0.0 0.0 3.9 25.5 12.0 1.0 11.2 8.8
Value 36 64 978 654 7 6 583 5966 2790 314 3094 2287
Source: DGCIS
40000
International Price Domestic Price
35000
30000
Rs. Tonne
25000
20000
15000
17
price policy for
sugarcane
Trade Policy
3.5 Export of sugar was decanalized in January, 1997 and permitted subject to obtaining Registration-
cum-Allocation Certificate (RCAC) from Agricultural and Processed Food Products Export
Development Authority (APEDA). The requirement of RCAC was dispensed with from April,
2001 and export of sugar could be undertaken by the sugar mills/merchant exporters, after
obtaining the export release order from the Directorate of Sugar, DFPD.
3.6 The Government banned export of sugar from June, 2006 to March, 2007 to curb rise in its prices
in the domestic market. In view of expected higher production of sugar during the 2006-07
sugar season, the Government relaxed ban on export in January, 2007 i.e. before the stipulated
expiry of ban and allowed export against advance licenses and thereafter for exports under OGL.
Due to anticipated higher production 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, in view of estimated lower production during 2008-09 and 2009-
10 sugar seasons, the Government reintroduced 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, export of 15 lakh tonnes in 2010-
11 and 20 lakh tonnes in 2011-12 was allowed under OGL through release order mechanism.
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. As already mentioned in Chapter-1, to encourage sugar
factories to export raw sugar, a scheme has been notified in February, 2014 to give incentives for
marketing and promotion services for raw sugar production targeted for export markets. This
export incentive has been extended till September, 2014.
3.7 Import of sugar was placed under Open General License (OGL) with zero duty in March, 1994.
The Government imposed a basic customs 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 the 2008-
09 and 2009-10 sugar seasons, the domestic sugar production has declined and 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 Feb, 2009 upto Sept, 2009
and also allowed import of raw sugar at zero import duty under OGL from April, 2009 which
was applicable till June, 2012. The Government re-imposed import duty of 10 percent in July,
30
price policy for sugarcane2015-16 Sugar Season
7000 18
25 6000
5000
20
Lakh Tonnes
2012 which was further increased to 15 percent in July, 2013 in view of decline in international
Rs Crore
4000
prices of 15
sugar so as to give protection to the domestic sugar industry.
3000
10
3.8 Domestic wholesale prices of refined sugar (Mumbai) have been generally higher 2000 than
international
5 prices of refined sugar (LIFFE) during the period from 2002 to 2014 (Q2)
1000
(Chart-3.4). However, domestic wholesale prices have followed the trend in international prices
0
of sugar. Indias exports 0
2003- are mainly
2005-to2006-
neighbouring countries like Bangladesh
2011- 2012- and
2013-Sri Lanka and

2002- 2004- 2007- 2008- 2009- 2010-
03
the countries such as04UAE,05Iran,06Yemen,
07 08
Saudi 09
Arabia, 10
Sudan,11 12
Somalia, 13
Tanzania,14
Djibouti and
Quantity 0.4 0.7 9.3 5.6 0.0 0.0 3.9 25.5 12.0 1.0 11.2 8.8
KenyaValue
which are36
comparatively
64 978
nearer7to India
654 6
than
583
the main competitors
5966 2790 314
like Brazil, Thailand
3094 2287
and Australia. The difference in freight charges is making it possible for India to export sugar to
these countries.
Chart-3.4: International Prices versus Domestic Wholesale Prices of Sugar

40000
International Price Domestic Price
35000
30000
Rs. Tonne
25000
20000
15000
10000
5000
2004 Q1
2006 Q1
2002 Q1
2002 Q3
2003 Q1
2003 Q3
2004 Q3
2005 Q1
2005 Q3
2006 Q3
2007 Q1
2007 Q3
2008 Q1
2008 Q3
2009 Q1
2009 Q3
2010 Q1
2010 Q3
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
Sources: LIFFE For International Price and DES and M/o consumer affairs for Domestic Price at Mumbai.
Global Outlook
3.9 According to OECD-FAO Agricultural Outlook 2014-2023, global production is projected to
increase by 1.9 percent per annum over the projection period and to reach nearly 216 million
tonnes by 2023. Much of the increase in production is expected to originate from countries
producing sugarcane rather than sugar beet, mainly due to higher yields rather than area
expansion. It is projected that sugarcane will account for virtually all of the additional sugar
production and represent nearly 86 per cent of sugar output in 2023, with only minimal additional
19
price policy for
sugarcane
contribution from sugar beet over the same period. World sugar prices are expected to continue
to be volatile over the course of the outlook period but will edge moderately upward on the
back of rising costs of production. The likely international prices of sugar, as per projections of
OECD-FAO Agricultural Outlook are indicated in Table-3.1.
Table-3.1: Forecast for International Prices of Sugar

Commodity Price Forecast (US $/tonne)

2014-15 2017-18 2020-21 2023-24
Raw Sugar 374.1 393.2 372.6 430.7
Refined Sugar 479.2 497.1 465.4 518.6
Source: OECD- FAO Agricultural Outlook for 2014-2023.

Note: 1. Raw Sugar world price, ICE contract No.11 nearby, October/September
2. Refined Sugar price, Euronext, Liffe, Contract No.407 London, Europe, October/September.
3.10 International prices of sugar have followed a downward trend during 2013 and 2014 (up to June,
2014), with lower price volatility, due to global sugar surplus. Sugar price recovery is likely to be
subdued in the short term due to accumulation of large global stocks. However, due to weather
aberrations this year, the indications of below normal monsoon rainfall are pointing to possible
production shortfall in India which is the second largest sugar producer and the largest sugar
consumer in the world. This scenario will lead to increase in prices of sugar in domestic as well
as international market.
Recapitulation
3.11 The sugar stocks in the country are comfortable and the international prices are lower than the
domestic prices of sugar. To contain imports, the Commission recommends that the import
duty be increased from 15 percent to 20 percent. This will provide some protection to domestic
producers. It is also recommended to continuously monitor domestic and international price
trends and identify the trigger points to tweak tariff rates so that these remain relevant and
rational in changing global scenario.
********
Chapter - 4
Costs, Returns and
Inter-Crop Price Parity
4.1 The Cost of Production (CoP) is one of the important determinants of Fair and Remunerative
Prices (FRP) of sugarcane. Besides cost, the Commission considers other important factors such
as demand and supply market prices of sugar and its by-products, inter-crop price parity, the
likely impact of FRP on consumers, rational utilization of natural resources like land and water.
4.2 The Commission uses the cost estimates furnished by the DES, Ministry of Agriculture under
Comprehensive Scheme for Studying the Cost of Cultivation of Principal Crops in India (CS).
CS data is generally received by the Commission with a time lag of two to three years. This
data is used to project the costs for ensuing sugar season i.e. 2015-16 in respect of major cane
growing states of Andhra Pradesh, Haryana, Karnataka, Maharashtra, Tamil Nadu, Uttar Pradesh
and Uttrakhand. These projected cost estimates are factored into formulation of price policy
Chapter - 4
recommendations.
4.3 The Commission has projected CoP estimates for the 2015-16 sugar season, based on actual
estimates for the latest three years viz. 2010-11 to 2012-13 for each state. These three projections
capture movement in overall input cost separately for the year 2015-16 over each of the years
viz., 2010-11, 2011-12 and 2012-13. An assessment of overall increase in input cost likely for
the year 2015-16 with reference to each of the three consecutive years ending with 2012-13
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 This data is obtained from Labour Bureau, inputs from State
governments, Office of the Economic Adviser (OEA), Ministry of Commerce and Industry,
Fertilizers Association of India (FAI) and National Seeds Corporation (NSC). Based on CIPI
thus constructed, the Commission then projected CoP for 2015-16 sugar season.
4.4 As costs for ensuing year are projected on the basis of certain implicit assumptions, projected
costs may turn out to be different from the actuals, when actual costs are available. The
Commission works out a correction factor (CF), based on the difference between actual and
the corresponding projected costs. The CF thus worked out is incorporated in the projected cost
so as to ensure its convergence to actuals when available.
21
price policy for
sugarcane
Costs and Profitability of Sugarcane during 2010-11 to 2012-13

4.5 Profitability can be seen from two perspectives. The first is gross returns which are defined as
gross value of output less costs A2+FL and the second is net returns which represents gross
value of output over costs C2. The state-wise and All-India average returns (both gross and net)
Costs, Returns and Inter-Crop Price Parity
during 2010-11 to 2012-13 for sugarcane are presented in Table-4.1. Gross returns as percent
of cost A2+FL is maximum for Karnataka at 209 percent followed by Uttrakhand and Haryana
at 201 and 197 percent respectively. The rate of return over C2 cost during this period stands
at 58 percent at all India level, and ranges from 28 percent in Andhra Pradesh to 81 percent in
Karnataka.
Table-4.1: Gross and Net Returns of Sugarcane

(Average from 2010-11 to 2012-13)
(Rs/ha, Percent)
Gross Net
Gross Net
State Cost A2+FL* Cost C2# GVO Returns Returns
Returns Returns
(Percent) (Percent)
Andhra Pradesh 72154 114551 146668 74515 103 32118 28
Haryana 51224 102140 152361 101137 197 50221 49
Karnataka 54094 92372 167199 113105 209 74827 81
Maharashtra 101115 147229 216373 115257 114 69144 47
Tamil Nadu 106167 135073 212273 106106 100 77201 57
Uttar Pradesh 44168 78000 130367 86199 195 52367 67
Uttrakhand 42918 73587 129391 86473 201 55804 76
All India 63986 101224 160437 96451 151 59213 58
*A2+FL cost includes all expenses in cash and kind on account of hired human labour, bullock labour, machine labour,
seed, insecticides and pesticides, manure, fertilizers, irrigation charges and miscellaneous expenses including family labour.
#C2 cost includes A2+FL cost, rental value of owned land and interest on own fixed capital
Source: Comprehensive Scheme (CS) for studying the Cost of Cultivation of Principal Crops, DES
Labour and Input Price Movement

4.6 Chart-4.1 depicts growth in wage rates of agricultural labour in major cane growing states and
at all-India level in nominal terms during March 2014 over March 2013. Agricultural wage rates
have gone up by 21 percent in the month of March of the latest year over the same month of last
year. The highest rate of increase during this period is reported for Haryana at 36 percent and the
lowest for Andhra Pradesh at 0.3 percent.
expenses including family labour.
#C2 cost includes A2+FL cost, rental value of owned land and interest on own fixed capital
Source: Comprehensive Scheme (CS) for studying the Cost of Cultivation of Principal Crops, DES
Labour and Input Price Movement
4.6 Chart-4.1 depicts growth in wage rates of agricultural labour in major cane growing states
price policy for
and at all-India level in nominal terms during March 2014 over March 2013. Agricultural
wage rates have gone up by 21 percent in the month of March of the latest year
2015-16 Sugarover the
Season
sugarcane 22
same month of last year. The highest rate of increase during this period is reported for
Haryana at 36 percent and the lowest for Andhra Pradesh at 0.3 percent.
Chart-4.1:
Chart-4.1:Growth
GrowthininWage
WageRates of Agricultural
Rates of AgriculturalLabour
LabourininNominal
NominalTerms
Terms
(March, 2014 over March, 2013)
(March, 2014 over March, 2013)
400 40
35
350
30

300
25
Wage Rate (Rs./Day)
250 20
Percentage
15
200
10
150
5
100 0
HR TN KRN All-India UP MAH AP
Wage Rate (Rs./Day) (March,2013) 245 265 189 187 166 194 221
Wage Rate (Rs./Day) (March,2014) 333 356 243 227 195 219 222
% change March,2014 over March,2013 36 34 28 21 17 13 0.3
Source:
Source: Labour
Labour Bureau,
Bureau, Shimla
Shimla
4.7 Out of various factors of production and other inputs, labour and land accounted for 32 percent
each in the total C2 cost of production (Chart-4.2) in TE 2013-14. Given that wage rates (Annex
25
Table-4.1) have been increasing rapidly in the recent years coupled with significantly high share
in the total cost of production, it is imperative to ramp up farm mechanization in a big way so as
to improve productivity. Currently, rate of penetration in terms of mechanization is far lower in
relatively small landholdings. Therefore, there is a need to nudge relatively small farmers towards
mechanization in order to reduce operational costs in medium to long term. Equipments such as
Cane Thumper, which is a multi-use power tiller that performs tillage, inter-row cultivation; and
the Sickle Sword for cane cutting be customized to suit relatively small holdings so that it can cut
cane in small pockets of land under all types of conditions and are easy to handle. Given the low
propensity of farmers to make capital investment, the Commission recommends to formulate a
scheme to lend hand holding to farmers to enable them to go for sugarcane farm mechanization
on a massive scale. Some states such as Gujarat and Maharashtra have already initiated a scheme
under which farmers are given subsidy for farm mechanization. The Government of India
may formulate a scheme to lend hand holding to farmers to enable them to go for sugarcane
farm mechanization on a massive scale. In the medium to long run, it will contain the cost of
production, increase the productivity and augment profitability.
propensity of farmers to make capital investment, the Commission recommends to
formulate a scheme to lend 'hand holding' to farmers to enable them to go for sugarcane
farm mechanization on a massive scale. Some states such as Gujarat and Maharashtra
have already initiated a scheme under which farmers are given subsidy for farm
23
sugarcane
mechanization. The Government of India may formulate a scheme to lend 'hand holding'
price policy for
to farmers to enable them to go for sugarcane farm mechanization on a massive scale. In
the medium to long run, it will contain the cost of production, increase the productivity
and augment profitability.
Chart-4.2: Share of Major Inputs in Total Cost of Production (C2)
Chart-4.2: Share of Major Inputs in Total Cost of Production (C2)
Others
16%
Labour
Fertilizer 32%
7%
Capital
13%
Land
32%
Source: Computed by the Commission on the basis of CS data available from DES
Source: Computed by the Commission on the basis of CS data available from DES
4.8 The prices of farm inputs (Chart-4.3), based on WPI (2004-05=100), exhibit an upward trend
4.8 The prices of farm inputs (Chart-4.3), based on WPI (2004-05=100), exhibit an upward
during the period May, 2013 to May, 2014. While the prices of fertilizers, pesticides, tractors and
trend during the period May, 2013 to May, 2014. While the prices of fertilizers,
lubricants have increased in the range of 2 percent to 6 percent, those of electricity for irrigation,
pesticides, tractors
HSDO, fodder andand lubricants
cattle feed havehave increased
escalated in the range
by 13 percent of 2 percent
to 15 percent. to 6 percent,
It increased at high
those of electricity for irrigation, HSDO, fodder and cattle
rate of 24 percent in case of LSDO (details in Annex Table-4.2). feed have escalated by 13
percent to 15 percent (details in Annex Table-4.2).
Chart-4.3:
Chart-4.3:Movements
MovementsininPrices
Pricesofof
Farm Inputs
Farm Inputs
(May, 2014 over May, 2013)
(May, 2014 over May, 2013)
320 24
300
21
280
26 18
260
240 15
220
12
Price indices
Percentage
200
180 9
160 6
140
3
120
100 0
Non-
LSDO Elect.(Irri.) HSDO Fodder CattleFeed Pesticides Tractors Lubricants Fertilisers
Elect.(Mach.)
Price Index of May,2013 254 185 203 244 233 123 144 253 152 123
Price Index of May,2014 314 212 232 278 263 131 151 264 154 125
Inflation 24 15 14 14 13 6 5 4 2 1
Source: DIPP
Source: DIPP
Cost Projections of Sugarcane for the 2015-16 Sugar Season

4.9 The projected costs for sugarcane vary across states. Based on the state-wise costs, an all
India weighted average cost of production, with weights being relative shares of the
states in the total production in TE 2013-14, has been arrived at. The projected costs of
cane for various states for 2015-16 sugar season have been adjusted at uniform recovery
rate of 9.5 per cent, using state wise recovery rates. For an illustration, the all-India
projected cost of production A2+FL and C2 is Rs.140 and Rs.215 per quintal respectively,
24
Cost Projections of Sugarcane for the 2015-16 Sugar Season

4.9 The projected costs for sugarcane vary across states. Based on the state-wise costs, an all India
weighted average cost of production, with weights being relative shares of the states in the total
production in TE 2013-14, has been arrived at. The projected costs of cane for various states for

2015-16 sugar season have been adjusted at uniform recovery rate of 9.5 per cent, using state
wise recovery rates. For an illustration, the all-India projected cost of production A2+FL and C2
is Rs.140 and Rs.215 per quintal respectively, the recovery rate is 10.05 and using these the All
India projected cost adjusted for 9.5 percent recovery comes out to Rs.132 (140*9.5/10.05) and
Rs.203 (215*9.5/10.05) per quintal). Table-4.2 presents state-wise and all-India projected cost
A2+FL and C2 (adjusted for recovery rate of 9.5 per cent) of sugarcane for 2015-16 sugar season.
(Also see Annex Table-4.3 and Annex Table-4.4).
Table-4.2: Projected Costs of Sugarcane for 2015-16 Sugar Season

(Rs/qtl)
Crop Costs at State-specific Costs at 9.5 percent recov- Cost of Marketing, Modified
recovery rates ery rate Transportation Cost#
and Insurance
A2+FL C2 A2+FL C2
Premium
Andhra Pradesh 134 230 132 227 37 264
Haryana 134 257 131 251 21 272
Karnataka 92 175 84 160 28 187
Maharashtra* 142 196 118 163 17 180
Tamil Nadu 146 187 154 197 17 214
Uttar Pradesh 150 241 155 249 20 269
Uttarakhand 139 197 144 203 14 218
All India 140 215 132 203 21 224
# Modified cost is total of projected cost plus transportation and insurance charges.
* Transportation cost of Tamil Nadu has been used as a proxy for Maharashtra due to non-availability of data for the state.
4.10 Chart-4.4 depicts the 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
illustrates the percent of cost of major producing states that is covered by all India weighted
average cost of production in terms of relative share of production of those states for sugarcane
crop. It may be noted that all-India cost of production (C2) for sugarcane for the 2015-16 sugar
season is projected at Rs. 215/qtl. (unadjusted for recovery). However, it works out to Rs. 203/
qtl. when adjusted for 9.5 percent recovery. This cost covers about 50 percent of production of
cane in the country.
ascending order of cost with their corresponding relative shares in total production for
sugarcane. It illustrates the percent of cost of major producing states that is covered by
all India weighted average cost of production in terms of relative share of production of
those states for sugarcane crop. It may be noted that all-India cost of production (C2) for
25
sugarcane
sugarcane for the 2015-16 sugar season is projected at Rs. 215/qtl. (unadjusted for
price policy for
recovery). However, it works out to Rs. 203/qtl. when adjusted for 9.5 percent recovery.
This cost covers about 50 percent of production of cane in the country.
Chart-4.4: Supply Curve and Projected Cost of Sugarcane for 2015-16 Sugar Season
Chart-4.4: Supply Curve and Projected Cost of Sugarcane for 2015-16 Sugar Season
280
260
Cost of Production (Rs. per quintal)
240
All India C2 cost = Rs.215/qtl.
220
200
180
160 All India A2+FL cost = Rs.140/qtl.
140
120
100
80
60
40
20
0
1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96
Production Shares (%)

KTK TN MAH
UKD AP U.P.
HR All India A2+FL cost = Rs.140/qtl. All India C2 cost = Rs.215/qtl.
Inter Crop Price Parity

Inter Crop Price Parity
4.11 4.11 Inter crop price
Inter crop priceparity beingbeing
parity a factora for determination
factor of MSPs, the Commission
for determination of MSPs, the computes per
Commission
hectare returns
computes of different
per hectare crops that
returns are substitutes
of different cropsforthat
sugarcane. It may be seen
are substitutes for from Table-4.3
sugarcane. It may
bethat sugarcane
seen is the mostthat
from Table-4.3 profitable crop vis--vis
sugarcane its competing
is the most profitablecrops
croplikevis--vis
wheat, paddy and
its competing
cotton.
crops likeNet returnspaddy
wheat, as percent cost C2 turns
andofcotton. out to beas
Net returns 58percent
percent inofsugarcane duringout
cost C2 turns 2010-11
to be 58
to 2012-13 at all India level, compared with paddy (12 percent), cotton (32 percent) and wheat
percent in sugarcane during 2010-11 to 2012-13 at all India level, compared with paddy
(36 percent). However, sugarcane is basically an irrigated crop, and it needs to be compared only
(12 percent), cotton (32 percent) and wheat (36 percent). However, sugarcane is basically
with fully irrigated paddy or wheat or cotton. Also, it needs to be kept in mind that sugarcane
an irrigated crop, and it needs to be compared only with fully irrigated paddy or wheat or
cultivation is about 12 months crop duration compared to about four months in cases of wheat
cotton. Also, it needs to be kept in mind that sugarcane cultivation is about 12 months'
or rice. Since sugarcane crop cycle on an average is about three times that of wheat and paddy,
crop duration
the returns compared
over A2+FL andtoCabout fournormalized
have been months infor cases
timeof wheat i.e.
duration, or returns
rice. Since sugarcane
per month
2
crop
havecycle
been on an average
derived for theseiscompeting
about three cropstimes that ofItwheat
(Table-4.3). and that
is observed paddy,per the returns
hectare gross over
28
returns for sugarcane at all-India level are generally higher than or close to those of irrigated
crops of wheat and paddy, even after adjusting for crop duration.
26
Table-4.3: Inter-Crop Price Parity in Returns

(Rs/ha, Percent)
Crop Cost Cost GVO Gross Gross Net Re- Net Per Per
A2+FL C2 Returns Returns turns Returns Month Month
(Per- (Percent) Gross Net
cent) Returns Returns
Sugarcane

All-India 63986 101224 160437 96451 151 59213 58 8038 4934
Uttar Pradesh 44168 78000 130367 86199 195 52367 67 7183 4364
Karnataka 54094 92372 167199 113105 209 74827 81 9425 6236
Maharashtra 101115 147229 216373 115257 114 69144 47 9605 5762
Paddy
All-India 26604 37733 42282 15679 59 4550 12 3920 1137
Punjab 30358 51914 69566 39208 129 17651 34 9802 4413
Haryana 31013 52277 70237 39224 126 17960 34 9806 4490
Andhra 36047 54578 61062 25014 69 6483 12 6254 1621
Pradesh
Uttar Pradesh 23588 34925 39835 16247 69 4911 14 4062 1228
Karnataka 33864 47388 58223 24359 72 10835 23 6090 2709
Cotton
All-India 33339 49439 65129 31790 95 15689 32 7948 3922
Gujarat 35193 51353 81223 46030 131 29870 58 1507 7467
Maharashtra 36837 50104 55322 18485 50 5217 10 4621 1304
Wheat
All-India 23914 39096 53356 29442 123 14260 36 7360 3565
Punjab 25111 47118 65819 40708 162 18701 40 10177 4675
Haryana 27528 49068 70340 42812 156 21272 43 10703 5318
Uttar Pradesh 25457 40689 51447 25990 102 10758 26 6498 2690
Maharashtra 29982 41164 44700 14718 49 3536 9 3680 884
Note: 1. Sugarcane as a whole is about 12- month crop and paddy as well as wheat are about 4- months crops.
2. For sugarcane and wheat, the average is for the years 2010-11 to 2012-13; for paddy and cotton the average is for the
years 2009-10 to 2011-12
Recapitulation
4.12 To sum up, the all-India weighted average projected cost C2, adjusted at 9.5 per cent recovery
for the 2015-16 sugar season is projected at Rs 203 /qtl. which is 5.2 per cent higher than the
projected cost of Rs. 193 /qtl. for the 2014-15 sugar season. The modified C2 cost, inclusive of costs
of transportation and insurance premium of sugarcane for the 2015-16 sugar season, is projected
at Rs. 224/qtl. Given the high share of labour at 32 percent in the total cost of production (C2),
coupled with high growth in wage rates, it is imperative to go for farm mechanization on large
scale. 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.
**********
Chapter - 5
Productivity: Different
Dimensions
Productivity Overview
5.1 Given that the land and water resources are increasingly coming under pressure, enhancing
productivity levels assumes importance not only from the point of view of meeting the rising
demands but also to develop our agriculture sector globally competitive. Empirical evidence
suggests that prices tilt competitive advantage, ceteris paribus, on a sustainable basis. One way
to reduce real prices of commodities is to increase their total factor productivity (TFP). While
it may take some time to study TFP for Indian agriculture based on cost of cultivation data, it
would be interesting to see how land productivity, a partial component of TFP, impacts cost
of production of sugarcane. With this objective in view, this chapter dissects land productivity
Chapter - 5
levels by Five Year Plan Period-wise (FYP). To increase production per drop of water, water
productivities i.e. water consumption per kg of sugar production across major cane producing
states have been analyzed. This will help formulating cogent water pricing policy to reflect its
scarcity.
Productivity Performance over Five Year Plan Periods

5.2 The average annual growth rates of area, production and productivity of sugarcane from the
Eighth Five Year Plan period onwards (1992-97 to 2013-14) are presented in the Annex Table-5.1
and Chart-5.1:
28
Chart-5.1: Growth of Area, Production and Productivity of Sugarcane,

Five Year Plan Period-wise
(Percent p.a.)
Plan-wise Growth Rates (Percent)

6.0 4.9
5.0
Growth Rates (%)
4.0
2.2
3.0 1.4 4.0
Productivity: Different Dimensions

2.0 1.0
1.0 1.9 1.2 0.9
0.0
0.3 0.7 0.0 -0.2
-1.0 0.2
-2.0 -1.5
-1.7
-3.0
Eighth Plan Ninth Plan Tenth Plan Eleventh Plan Twelfth Plan *
Area 1.9 1.2 4.0 0.0 -0.2
Production 2.2 1.4 4.9 1.0 -1.7
Productivity 0.2 0.3 0.7 0.9 -1.5
Note: 8th to 12th FYP periods pertain to 1992-1997, 1997-2002, 2002-2007, 2007- 2012 and 2012-2014 respectively.
Source: DES
5.3 The following points emerge from the above Chart-5.1:

Chart-5.2: Production and Productivity of Sugarcane
i.
The growth in productivity of sugarcane exhibited an increasing trend from 8th Five Year
Plan (FYP) to 11th FYP, but it turned negative during the first two years of 12th FYP. 80
380
360 70
ii. With
340
negative growth in productivity and area during the first two years of 12th FYP,
60
production showed a negative growth at (-) 1.7 p.a. during the period.
320
50
Production (Mn T)
300
5.4 The productivity of the sugarcane fluctuated in the range of 59 -72 M.T/Ha. in post 2000 era,
Yield (MT/Ha.)
40
280of 59 M.T/Ha. in 2003-04 and a high of 72 MT in 2011-12 (Chart-5.2). The lowest
with a low 30
260 of 234 million tonnes and the highest production of 361 million tonnes were posted
production
240 2003-04 and 2011-12. These extremes can be attributed to the performance of the 20
in the years
220 10
monsoon.
200 0
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013-
01 02 03 04 05 06 07 08 09 10 11 12 13 14
Production (Mn T) 296 297 287 234 237 281 356 348 285 292 342 361 341 348
Yield (MT/Ha.) 69 67 64 59 65 67 69 69 65 70 70 72 68 69
Source: DES
1.0 1.9 1.2 0.9
Growth
0.0
0.3 0.7 0.0 -0.2
-1.0 0.2
-2.0 -1.5
-1.7
-3.0
Eighth Plan Ninth Plan Tenth Plan Eleventh Plan Twelfth Plan *
Area 1.9 1.2 4.0 0.0 -0.2
Production 2.2 1.4 4.9 1.0 -1.7
29
price policy for
Productivity
sugarcane
0.2 0.3 0.7 0.9 -1.5

380 80
360 70
340 60
320
50
Production (Mn T)
300
Yield (MT/Ha.)
40
280
30
260
240 20
220 10
200 0
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013-
01 02 03 04 05 06 07 08 09 10 11 12 13 14
Production (Mn T) 296 297 287 234 237 281 356 348 285 292 342 361 341 348
Yield (MT/Ha.) 69 67 64 59 65 67 69 69 65 70 70 72 68 69
Source: Prepared by the Commission on the basis of information received from State Governments
Source: DES
Water Productivity: Adjusted for Time, Water Intake, Recovery Ratio

5.5 According to the existing practice, production per unit of area is taken into consideration to
compare land productivity of a given crop across states. Based on this criterion, Maharashtra
(801 qtl./ha) and Tamil Nadu (1020 qtl./ha) are more efficient compared to Bihar which has yield
of sugarcane at 512 qtl./ha in TE 2013-14. However, this approach reflects only one dimension
of land productivity. Since the duration of the crop in the field varies across states, and since
it requires very different quantities of water for irrigation leading to different recovery rates,
especially in tropical and sub-tropical regions, there is a need to look at other dimensions of
land productivity after adjusting for the duration of the crop, its water intake, and its recovery
rates. This is important as land and water are increasingly becoming scarce in India with high
opportunity costs. Therefore, the real resource cost of growing sugarcane in different regions
cannot be correctly compared unless land productivity is normalized for the time duration of the
crop, its water intake, and its recovery rate. With this end in view, adjusted yields of sugarcane
and water intake in major cane producing states of Andhra Pradesh, Bihar, Maharashtra, Tamil
Nadu and Uttar Pradesh (accounting for 78 percent of total cane production in the country) have
been derived (Annex Table-5.2). As the main purpose of cultivation of the crop is not to produce
cane for the sake of it but to produce sugar, it makes sense to work out the water consumed per
unit production of sugar in major cane producing states. Chart-5.3 depicts water intake per kg
of sugar produced which varies a great deal from state to state.
30
Chart-5.3: Water Consumption per Kg of Sugar Production, TE 2012-13

0 0
20
Water Consumed per kg of
500 40
Efficiency Gaps (%) {in Water

Sugar Produced (litres)
60
1000 80
Consumption}
100
1500 120
140

2000 160
180
2500 200
Bihar UP All-India Mahara Andhra TN
Water Consumed (litres ) to produce 1 kg
822 1028 1893 2104 2234 2245
of Sugar
Efficiency Gaps (%) {in Water consumption
0 25 130 156 172 173
for production of 1 kg of sugar}
Source:Prepared
Source: Prepared by
by the
theCommission
Commissionononthe basis
the of information
basis received
of information fromfrom
received State State
Governments
Governments
5.6 Given the increasing scarcity of

Chart-5.4: water across
State-wise states in varying
Productivities magnitudes, it is critical to assess
of Sugarcane
water required per unit production of sugar. It may be seen that Maharashtra, Andhra Pradesh
and Tamil 120Nadu consume an additional 1300 to 1400 liters (over and above what it takes Bihar to
110
produce100 sugar) for every kilogram of sugar produced. The efficiency gaps in water productivities
of sugar production are quite substantial at 156 percent (Maharashtra), 172 percent (Andhra
90
80
Pradesh)70and 173 percent (Tamil Nadu). This analysis has high relevance for India, as it is
Yield (MT/Ha.)
60
projected50by the International Water Resources Group that India will be 50 percent short of
water by402030. Given that sugarcane is a water guzzling crop, its long term development must
30
ensure that20 it is in line with availability of sufficient water and its cost. A crude, back of the
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013-
envelop, calculation
01 shows03that bringing
02 04 05 irrigation
06 07water08through
09 major
10 and
11 medium
12 irrigation
13 14
schemes or through borewells in states like Maharashtra and Tamil Nadu cost more than 50
Bihar 42 46 42 41 39 43 46 35 45 45 52 52 51 two
Karnataka 103 81 85 66 80 83 88 86 83 90 94 90 84 86
to three times higher than in say Bihar or even eastern Uttar Pradesh. Since real cost of water in
Maharashtra 83 78 74 58 63 78 75 81 79 85 85 85 75 80
Maharashtra,
Tamil Nadu Andhra
105 102Pradesh
92 and
92 Tamil
101 Nadu
105 is 105
much107higher106than101
in Bihar
108 and
111UP, it
98raises
97an
issue
U P of comparative
55 advantage.
58 56 If this61
56 costing
58 is incorporated
59 57 in calculating
52 59 57 water
60 productivity,
60 61
the difference in sugarcane yields will be so high that Bihar and Uttar Pradesh would turn out
toDES
Source: be the most efficient producers of sugar per unit cost of water, adjusted for time duration
and recovery. Historically, Bihar and eastern UP were the seats of sugarcane before licensing
regime shifted the sugarcane belt to western India because licenses were given on priority to
cooperatives, and cooperative had their roots in western India. But western India, especially
31
price policy for
sugarcane
Maharashtra is not blessed with natural endowment of water, as Bihar or eastern UP. In fact in
Maharashtra, sugarcane cultivation, which is on less than 4 percent of the total cropped area
of the state, takes away almost 70 percent of irrigation water in the state, leading to massive
inequity in the use of water within the state. Future growth of cane in Maharashtra is likely to be
severely hampered by scarce water
0 supplies unless much of sugarcane is put on drip 0irrigation or
varieties are evolved that use less water. From a long term perspective, wisdom lies20in aligning
500 Water Consumed per kg of 40
Efficiency Gaps (%) {in Water

Sugar Produced (litres)
Indias natural comparative advantage (resource endowment) with the cropping patterns. 60 From
that perspective, future growth
1000 has enormous potential in Bihar and eastern UP, provided80 water
Consumption}
100
pricing policies are formulated in a manner that reflect its scarcity and also an environment of
1500 120
investments in these two states is created. This is what will give India a competitive edge
140
globally
and in a sustainable manner.
2000 160
180
State-wise Productivities of Sugarcane
Bihar UP
2500
All-India Mahara Andhra TN
200
Water Consumed (litres ) to produce 1 kg

822 1028 1893 2104 2234 2245
of Sugar
5.7 The state of Tamil Nadu has the highest productivity of sugarcane followed by Karnataka,
Efficiency Gaps (%) {in Water consumption
0 25 130 156 172 173
Maharashtra, UP ofand
for production 1 kg ofBihar
sugar} (Chart-5.4). It is also observed that there is generally an upward
trend in productivities and productivity gaps of various states with reference to the highest
Source: Prepared by the Commission on the basis of information received from State Governments
productivity are narrowing down in post-2002-03 period.
Chart-5.4: State-wise Productivities of Sugarcane
Chart-5.4: State-wise Productivities of Sugarcane
120
110
100
90
80
70
Yield (MT/Ha.)
60
50
40
30
20
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013-
01 02 03 04 05 06 07 08 09 10 11 12 13 14
Bihar 42 46 42 41 39 43 46 35 45 45 52 52 51 50
Karnataka 103 81 85 66 80 83 88 86 83 90 94 90 84 86
Maharashtra 83 78 74 58 63 78 75 81 79 85 85 85 75 80
Tamil Nadu 105 102 92 92 101 105 105 107 106 101 108 111 98 97
UP 55 58 56 56 61 58 59 57 52 59 57 60 60 61
Source: DES
Source:
Note: DES
1. The figures for 2013-14 are Third Advance Estimates
2. Bihar includes Jharkhand and UP includes Uttarakhand.
32
Productivity of Sugarcane in Tropical and Sub-Tropical Regions

5.8 The tropical region2 has higher productivity compared to that in sub-tropical3 region. The higher
productivities in tropical region may be attributed to their rich natural endowments, use of
better technologies or farm practices etc. which may be a matter of further investigation. The
productivities of tropical, sub-tropical and average All India have been depicted in the Chart-5.5:
Chart-5.5:
Chart-5.5: Productivities of Tropical,
Productivities of Sub-Tropicaland
Tropical, Sub-Tropical andAverage
Average All
AllIndia
IndiaRegions
Regions

100
90
Productivities(MT/Ha.)
80
70
60
50
40
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013-
01 02 03 04 05 06 07 08 09 10 11 12 13 14
All India 69 67 64 59 65 67 69 69 65 70 70 72 68 69
Tropical Region 91 83 78 69 78 84 83 85 83 87 88 88 81 83
Sub Tropical Region 55 58 56 55 60 58 59 57 52 59 57 60 60 60
Source: DES
Source: DES
District-wise and State-wise Productivity Levels in Major Sugarcane

Producing States
5.9 This section seeks to analyze district-wise productivity behaviour of major cane producing
states. Five major states namely AP, Karnataka, Maharashtra, TN and UP contribute nearly 87
percent of total sugarcane production in the country. To appraise productivity at district level,
the Commission has arranged yield levels in ascending order in these states, made yield bands
based on intelligible differentia and then worked out area coverage corresponding to each of
the yield bands (Table-5.1). The objective of this analysis is to identify the districts with the
highest productivity levels in major cane producing states so that other districts can emulate
these benchmarking districts, subject to adaptability and other technical constraints.
Tropical region includes states of Gujarat, Karnataka, Maharashtra, Andhra Pradesh and Tamil Nadu
2
3
Sub-tropical region includes states of Uttar Pradesh, Uttarakhand, Bihar, Punjab and Haryana
33
price policy for
sugarcane
Table-5.1: District-Level Yield-bands of Sugarcane in Major Producing States, 2013-14
S.N. Yield Band AP Kar Maha TN UP

(Tn./Ha.)
Area No. of Area No. of Area No. of Area No. of Area No. of
(%) Distts. (%) Distts. (%) Distts. (%) Distts. (%) Distts.
1 Up to 40 0 0 0 0 7 3 0 0 0 0
2 41-80 40 5 23 8 50 18 0 0 100 43
3 81-120 60 8 70 20 43 4 83 21 0 0
4 Above 120 0 0 7 1 0 0 17 8 0 0
Total Area 192 425 933 346 2228

(000 ha)
Max Yield (Tn/ 107.14 123.50 108 135.87 75
Ha.)
Top 3 distts. Kurnool, Mandya, Sangli, Pune, Karur, Bagpat, Shamli,
Summary Indicators of Land Productivity
In descending Nellore, Guntur Davanagere, Kolhapur Namakkal, Muzaffarnagar

order of Yields Mysore Pudukottai
Area under 5.9 9.3 36.3 10.7 10.2
top 3 distts (%)
(highest yield
levels)
Minimum 56.25 52.25 39.63 85 46.56
Yield. (Tn/ha.)
Distt. Having Visakhapatnam Gulbarga Aurangabad Thirunelveli Balrampur
Min. Yield.
Share of Area 24.6 3.5 1.6 1.5 3.8
under Min.
Yield (%)
Average Yield 79.0 84.1 74.6 111.4 60.5
(Tn/Ha)
Efficiency Gap4 26.3 31.9 31.0 18.0 18.9
(%)
Note: TN data is for 2011-12, Kar and Maha data is for 2012-13, AP and UP data is for 2013-14
$: DES
Sources: DES and Concerned States
5.10 Based on district-wise analysis of productivity of sugarcane in major producing states, it emerges
that certain districts give significantly higher yields compared to their respective state averages
and the efficiency gaps range between 18 percent in TN to about 32 percent in Karnataka.
The top three districts in each of major producing states are Kurnool, Nellore, Guntur (AP),
Mandya, Davanagere, Mysore (Karnataka), Sangli, Pune, Kolhapur (Maharashtra), Karur,
4
Efficiency Gap=(1- Average Productivity of State/Highest Productivity District of the State)*100
34
Namakkal, Pudukottai (TN) and Bagpat, Shamli, Muzaffarnagar (UP). Many of these districts
with higher yield levels for a particular crop in a state are contiguous i.e. are neighbouring
districts (District-wise maps at annex). While these districts may have certain advantage in
terms of natural endowment, they could be following different farming practices, and applying
better inputs which need to be explored separately. Given the fact that there is an increasing
pressure on land resources, it becomes important to make optimal utilization of land. In this
background, it is imperative to study these districts in greater details so as to propagate /replicate
farming practices and inputs used in these districts to other districts. This will go a long way in

augmenting productivity levels.
5.11 Deteriorating soil health has been a cause of concern and leads to sub optimal utilization of
farming resources. Indian soils show deficiency of nutrients i.e. N, P, K in many parts of the
country. Site specific nutrient management involving soil test based application of fertilizers
is critical to enhance fertilizer use efficiency. In this context, the Commission takes note of
allocation of Rs.100 crore in budgeted expenditure of 2014-15 for providing soil health cards
to every farmer and Rs.56 crore for setting up 100 Mobile Soil Testing Laboratories across the
country. Since these measures will help improving the productivity levels, the Commission
recommends its implementation on priority basis across the country.
Relationship between Real Cost and Yield Levels

5.12 To test the hypothesis of existence of inverse relationship between real CoP and yield levels,
regression analysis on panel data (for 2000-01 to 2010-11 across all major cane producing states)
has been undertaken by fitting the following regression model:
Log CoP = a+ e*log y

where CoP = real Cost of Production,
y = yield rate,
e = elasticity; and
a = constant
5.13 The above regression model was tested on entire panel data and also separately on its two sub-
sets viz. tropical region and sub-tropical region. Of these three regressions, only the regression
analysis for tropical region gave the statistically significant (with 95 percent level of confidence)
result which is presented hereunder:
Log CoP = 7.323469- 0.366079*log y
35
price policy for
sugarcane
Chart-5.6: Relationship between Cost of Production and Productivity

of Sugarcane for Tropical Region
5.14 This regression equation implies that real cost (CoP) can be reduced by 3.7 percent if yield level
in tropical region increases by 10 percent. The behaviour of CoP in real terms (constant prices
2012-13 =100) with respect to yield level of cane is depicted in the scatter diagram (Chart-5.6).
Benchmarking
5.15 Productivity plays an important role in containing the cost of production, enhances the global
competitiveness, increases profitability and ultimately may reduce rural poverty. It is, therefore,
imperative to envision Indias position vis--vis other major producing countries in the world
on productivity scale. This would enable the country to gain greater competitiveness by setting
out the targets in benchmarking productivity standards of those crops. With this end in view,
all-India productivity level of sugarcane crop with benchmarking countries across the world and
also across states in the country along with efficiency gaps have been worked out and presented
in the Annex Table-5.3. Productivity levels of the benchmarking countries and of states along
with their shares in production are depicted in Chart-5.7.
36
Chart-5.7: Benchmarking: Sugarcane Productivity, Production Shares Efficiency, TE 2012-13

120 100
World India 90
100 80
70
% Share and Efficiency Gap

80
60
Yield (Tn/Ha.)
60 50
40
40 30
20

20
10
0 0
Colom Guate Austra Argent Thaila Philipp Mexic ALL
Brazil USA India World TN KAR MAHA AP U.P
bia mala lia ina nd ines o INDIA
Yield (Tn/Ha) 109.4 89.4 78.7 76.6 74.2 73.6 73.6 72.1 70.2 69.2 71.1 105.82 89.36 81.46 79.72 58.80 70.00
%Share 2.2 1.2 1.5 40.5 1.5 4.9 1.5 1.6 2.8 18.3 100.0 10.2 10.9 22.8 4.5 38.4 100.0
Efficiency gap 0.0 18.3 28.1 30.0 32.2 32.7 32.7 34.1 35.8 36.8 35.1 0.0 15.6 23.0 24.7 44.4 33.8
Source: FAO, DES
5.16 It may be noted (Annex Table-5.3) that the average productivity of sugarcane at all-India level is
far lower than those of the benchmarking countries. The efficiency gaps in productivity in India
are high at 36.8 percent. The countries which have higher productivities in comparison to India
are Columbia, Guatemala, Australia, Brazil, Argentina, Thailand, USA, Philippines and Mexico.
Brazil, India, Thailand and Mexico who contribute about two-third of the worlds sugarcane
production. Similarly, the efficiency gaps range between 15 percent and 45 percent in case of
productivity levels of important sugarcane growing states of India and the benchmarking state
(Tamil Nadu). This gap is nearly 34 percent, if the productivity levels of benchmarking state
(Tamil Nadu) and All India are compared.
5.17 In a competitive globalized world, it is also important to appraise if the country is catching up
with the best performing (benchmark) countries on the productivity scale. With this end in
view, the efficiency gaps in average yield levels of sugarcane over time have been assimilated for
last twelve years from 2001 to 2012, partitioned these into four non-overlapping periods viz. TE
2003, TE2006, TE 2009 and TE 2012. While temporal efficiency gaps in the yield levels of India
and benchmarking countries are presented in the Annex Table-5.3, its movements over time are
depicted in Chart-5.8. It emerges that the efficiency gaps have improved by about seven percent
points during TE 2003 to TE 2012.
37
price policy for
sugarcane
Chart-5.8: Temporal Movements in Efficiency Gaps

30
Efficiency Gaps (%)

35
40
45
50
TE 2003 TE 2006 TE 2009 TE 2012
Efficiency Gaps 44 47 36 37
Source: FAO
Recapitulation
5.18 To recapitulate, the following points emerge from the analysis
i. Water productivity analysis shows that Bihar consumes just 822 litres of water to produce a
consume an additional 1300 to 1400 liters of water over and above what it takes Bihar to produce
a kilogram of sugar. In Maharashtra, sugarcane cultivation, which is on less than 4 percent of
the total cropped area of the state, takes away almost 70 percent of irrigation water in the state.
This leads to massive inequity in the use of water within the state. Future growth of cane in
Maharashtra is likely to be severely hampered by scarce water supplies unless much of sugarcane
is put on drip irrigation or varieties are evolved that use less water. Given that sugarcane is
a water guzzling crop, its long term development must ensure that water pricing policies are
formulated in a manner that reflects its scarcity. Instead of focusing on economy in water use in
agriculture, most state governments have been content with subsidising electricity for pumping
irrigation water. Ensuring economy in water use needs to sink into the consciousness of policy
makers at the Centre and in the states so as to achieve the optimum production of sugar per drop
of water.
ii. Based on district-wise analysis, it emerges that districts of Kurnool, Mandya, Sangli, Karur and
Bagpat have the highest yields in their respective states (benchmark districts).These districts
need to be studied in great details so that farming practices and inputs applied in these districts
38
can be replicated in other districts after having due regard to soil and agro-climatic conditions.
This will help augmenting the overall land productivity and will contain cost of production of
the cane and improve profitability.
iii. The efficiency gaps in Indias productivity levels compared to those of benchmarking countries
need to be bridged. There is an urgent need to study the best national and international farming
practices, analytically identify the factors that have helped some states and countries to achieve
much higher productivity levels so as to adapt those practices after having due regard to soil and

agro-climatic conditions.
iv. The solution to contain the increasing cost of production lies in augmenting productivity
levels which are way below what current technology can provide. It is recommended to ensure
availability of quality seeds at affordable prices and also to propagate good farming practices.
This would increase global competitiveness, increase profitability and may reduce rural poverty.
*********
Chapter - 6
Recommendations for
Price Policy
6.1 The price policy for sugarcane is formulated by the Commission within the scope of its mandate
and the terms of reference given to it under the Sugarcane (Control) Order, 1966 issued under the
EC Act, 1955. As per the provisions of Clause 3(1) of the Sugarcane (Control) Order, 1966, The
Central Government may, after consultation with the authorities, bodies or associations as it may
deem fit, by notification in the 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;

Chapter - 6
(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 while recommending the FRP
of sugarcane.
6.2 Some sugarcane growing states such as Uttar Pradesh fix SAP which is usually way above FRP
decided by the Central Government. Fixing SAP without regard to relevant factors such as prices
of sugar has aggravated the problem in the sugar sector. Though the Government has taken some
40
steps to support the sector, these may prove to be a temporary respite if FRP of cane and sugar
prices are treated as separate entities. A durable solution to this problem lies in establishing an
explicit link, based on economic principles, between the sugar prices and FRP of cane which is
outlined in the paragraph 6.3.
6.3 A scientifically sound and economically fair methodology to determine prices of cane is to
adopt hybrid approach i.e. prices of cane be determined by RSF (PRSF) or FRP, whichever is
higher. Under the RSF, the Total Revenue Pot (TRP) generated from the cane-sugar value chain,
Recommendations for Price Policy

which is the value of sugar and its first stage by-products, be shared between the farmers and the
millers in the ratio of their relative costs in producing cane at farm level and converting that cane
into sugar and its by-products at factory level. This ratio works out to 75:25 at 10.31 recovery
rate. However, arrangement under RSF needs to be aligned with FRP to protect the farmers in
the event of any downward movement in prices of sugarcane. The FRP would serve as the floor
price which the farmers would receive even when sugar prices fall to a level which leads to prices
(as determined by RSF, say PRSF) lower than FRP. The Commission recommends that if PRSF
is less than FRP, the difference be financed by the Sugar Stabilization Fund to be created by the
Government.
6.4 Blending of ethanol with petrol will help farmers getting better prices and would increase
their profitability. This blending is environmental friendly as it is less polluting. It is, therefore,
recommended that blending of ethanol, a by-product of cane, with petrol be increased from 5
percent to 10 percent in a time bound manner. This will also help in containing imports of fossil
oil.
6.5 Currently stocks of sugar are comfortable and domestic prices are ruling above international
prices. In view of this situation, it is recommended to increase the import duty on sugar from
prevailing 15 percent to 20 percent so as to contain imports.
6.6 Some states such as UP declare SAP for rejected variety also and the price differential between
this variety and common one was kept just Rs.5/qtl. during 2012-13 and 2013-14. Such a meager
difference in the SAPs acts as a disincentive to farmers to adopt better varieties. The Commission
recommends that SAP of rejected variety, if any, be kept at Rs. 20/qtl. lower than that of the
common variety. This will help improve efficiency.
41
price policy for
sugarcane
6.7 The projected modified cost of production (C2) of sugarcane at all-India level (weighted average),
adjusted at 9.5 per cent recovery, is Rs. 224/qtl. for the 2015-16 sugar season. The all-India net
return for sugarcane, as a percentage of C2 cost, during the period 2010-11 to 2012-13 is 58
percent. Sugarcane is the most profitable crop as compared to its competing crops like wheat,
paddy and cotton even in fully irrigated conditions.
6.8 The distribution of the cost of production into various factors of production shows that labour
accounts for 32 percent in the total cost (C2). This coupled with high growth in wage rates calls
for farm mechanization on a large scale. 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. Given the low propensity of
farmers to make capital investment, the Commission recommends to formulate a scheme to
lend hand holding to farmers to enable them to go for sugarcane farm mechanization on a
massive scale. In the medium to long run, it will contain the cost of production, increase the
productivity and augment profitability.
6.9 Water productivity analysis shows that Bihar consumes just 822 litres of water to produce a
consume an additional 1300 to 1400 liters of water over and above what it takes Bihar to produce a
kilogram of sugar. Therefore, from a long term perspective, future growth has enormous potential
in Bihar and eastern UP, where Indias natural comparative advantage (resource endowment)
can be aligned with the cropping patterns. The most state governments, instead of focusing on
economy in water use in agriculture, have been content with subsidising electricity for pumping
irrigation water. Given that sugarcane is a water guzzling crop, its long term development must
ensure that water pricing policies are formulated in a manner that reflects its scarcity. Ensuring
economy in water use needs to sink into the consciousness of policy makers at the Centre and in
the states.
6.10 Based on district-wise analysis, it emerges that districts of Kurnool, Mandya, Sangli, Karur and
Bagpat have the highest yields in their respective states (benchmark districts).These districts
need to be studied in great details so that farming practices and inputs applied in these districts
can be replicated in other districts after having due regard to soil and agro-climatic conditions.
This will help augmenting the overall land productivity and will contain cost of production of
the cane and improve profitability.
42
6.11 After having analyzed the relevant factors, the Commission recommends that FRP of sugarcane
for 2015-16 sugar season be fixed at Rs. 230/qtl. linked to basic recovery of 9.5 percent, an
increase of 4.5 percent over FRP for 2014-15 sugar season. For each 0.1 percent point increase
in recovery rate over and above 9.5 percent, the FRP would be increased by Rs. 2.42 per quintal.
All India average recovery rate being 10.05 percent achieved in 2012-13, the FRP recommended
works out to Rs. 243/qtl.
6.12 The Commission is of the considered opinion that these recommendations would steer sugar

sector towards greater stability and would go a long way in putting it on a higher trajectory of
growth.
(Dr. Ashok Vishandass)

Chairman
(D.S. Raghu) (Kaibalya Pradhan)

Member (Non-Official) Member (Non-Official)
(Dr. Shailja Sharma)

Member Secretary
14 August, 2014
43
price policy for
sugarcane
Annex Tables
44
Annex Table - 1.1: Sugarcane - Area, Production and Yield

Area: 000 hectares
Production : 000 tonnes
Yield : Kg. per hectare
State 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14*
1 2 3 4 5 6 7 8 9 10 11
Sub-Tropical Region
Area 2382 2569 2736 2662 2474 2323 2635 2663 2756 2789
Production 142498 148982 161605 151756 129398 137050 150018 159031 165310 168090
Yield 59825 57990 59064 57017 52305 58999 56939 59712 59977 60278
Uttar Pradesh
Area 1955 2156 2247 2179 2084 1977 2125 2162 2212 2228
Production 118716 125470 133949 124665 109048 117140 120545 128819 132428 134689
Yield 60733 58201 59626 57212 52326 59251 56727 59583 59868 60453
Uttarakhand
Area 107 101 121 124 107 96 107 108 110 104
Production 6441 6134 6100 7686 5590 5842 6498 6311 6785 6427
Yield 60196 60733 50413 61984 52243 60854 60896 58435 61736 61798
Bihar
Area 104 101 130 109 112 116 248 218 250 265.6
Production 4112 4338 5956 3855 4960 5033 12764 11289 12741 13157
Yield 39460 42822 45953 35496 44324 43422 51466 51711 50896 49535
Punjab
Area 86 84 99 110 81 60 70 80 83 89
Production 5170 4860 6020 6690 4670 3700 4170 5653 5919 6372
Yield 60116 57857 60808 60818 57654 61667 59571 70663 71313 71596
Haryana
Area 130 127 140 140 90 74 85 95 101 102
Production 8060 8180 9580 8860 5130 5335 6042 6959 7437 7446
Yield 62000 64409 68429 63286 57000 72095 71082 73253 73634 73000
Tropical Region
Area 1141 1482 2244 2211 1775 1698 2086 2204 2077 2057
Production 88456 124463 185684 188234 147670 148456 184529 193553 167556 171341
Yield 77545 83960 82739 85128 83199 87419 88460 87803 80664 83317
(Contd...)
45
price policy for
sugarcane
Annex Table - 1.1: Sugarcane - Area, Production and Yield

Area: 000 hectares
Production : 000 tonnes
Yield : Kg. per hectare
State 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14*
1 2 3 4 5 6 7 8 9 10 11
Maharashtra
Area 324 501 1049 1093 768 756 965 1022 933 937
Production 20475 38853 78568 88437 60648 64159 81896 86733 69648 75384
Yield 63194 77551 74898 80912 78969 84866 84866 84866 74650 80453
Gujarat
Area 197 197 214 211 221 154 190 202 176 175
Production 14570 14580 15630 15190 15510 12400 13760 12750 12690 12630
Yield 74072 74010 73037 71991 70181 80519 72421 63119 72102 72171
Andhra Pradesh
Area 210 230 264 247 196 158 192 204 196 192
Production 15739 17656 21692 20296 15380 11708 14964 16686 15567 15168
Yield 74948 76765 82167 82170 78469 74101 77938 81794 79423 79000
Karnataka
Area 178 219 326 306 281 337 423 430 425 420
Production 14276 18267 28670 26240 23328 30443 39657 38808 35732 35910
Yield 80202 83411 87944 85752 83018 90335 93752 90251 84075 85500
Tamil Nadu
Area 232 335 391 354 309 293 316 346 347 333
Production 23396 35107 41124 38071 32804 29746 34252 38576 33919 32249
Yield 100845 104671 105123 107484 106197 101452 108392 111362 97688 96989
All India
Area 3662 4202 5151 5055 4415 4175 4885 5038 4999 5017
Production 237088 281172 355520 348188 285029 292302 342382 361037 341200 348384
Yield 64752 66919 69022 68877 64553 70020 70091 71667 68254 69442
* : Third Advance Estimates

Source: Directorate of Economics & Statistics (DES), Ministry of Agriculture (Concluded)
46
Annex Table - 1.2: State-wise Production of Sugar

(Lakh Tonnes)
State 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 (P)
1 2 3 4 5 6 7 8 9 10 11
Sub-tropical Region 61.8 70.4 105.9 91.9 50.7 61.5 71.5 86.2 93.0 85.1
Uttar Pradesh 49.0 54.6 83.5 73.2 41.5 51.7 57.6 69.6 75.0 66.1
Uttarakhand 3.2 4.1 5.3 4.0 2.2 2.9 3.1 3.3 3.4 3.0
Bihar 2.6 4.1 4.8 3.4 2.2 2.6 3.9 4.5 5.1 6.0
Punjab 3.2 3.8 5.5 5.3 2.4 1.8 3.0 3.9 4.4 4.7
Haryana 3.8 3.8 6.8 6.0 2.3 2.5 3.9 4.9 5.1 5.4
Tropical Region 66.1 117.1 172.9 167.6 94.8 125.2 168.3 173.8 154.8 151.6
Maharashtra 21.9 51.7 90.1 90.8 46.0 70.4 90.7 90.0 79.9 75.9
Gujarat 7.9 12.2 13.9 13.7 10.2 11.9 12.7 10.0 11.3 13.6
Andhra Pradesh 11.5 12.5 19.2 13.4 5.9 5.1 10.1 11.4 9.8 9.6
Karnataka 10.8 19.7 25.4 28.4 16.8 25.1 36.4 38.7 34.4 41.0
Tamil Nadu 14.0 21.0 24.2 21.4 16.0 12.7 18.4 23.8 19.3 11.5
Others 2.1 2.1 3.2 3.5 1.2 1.4 3.8 3.5 4.1 7.1
All India 130.0 189.6 282.0 263.0 146.8 188.0 243.5 263.4 251.8 243.8
P : Provisional
47
price policy for
sugarcane
Annex Table-2.1: Average Recovery of Sugar from Sugarcane

(Percent)
State 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 (P)
1 2 3 4 5 6 7 8 9 10 11
Andhra Pradesh 10.3 10.7 10.1 9.7 10.1 9.9 9.3 9.8 9.8 9.6
Bihar 9.3 9.6 9.5 8.7 9.2 9.3 9.5 9.3 9.1 8.9
Gujarat 10.9 10.8 10.8 10.7 10.9 9.5 10.5 10.0 10.6 10.8
Haryana 10.5 10.2 9.8 9.7 9.9 9.1 9.4 9.0 9.1 9.7
Karnataka 10.2 10.1 10.8 10.7 10.1 10.3 10.7 10.9 11.2 10.4
Maharashtra 10.9 11.4 11.7 11.4 11.8 11.5 11.5 11.3 11.7 11.4
Punjab 9.7 9.8 9.2 9.5 9.3 9.3 8.6 8.8 9.1 9.1
Tamil Nadu 9.9 9.6 9.2 9.3 9.3 9.6 8.9 9.1 9.4 9.0
Uttar Pradesh 9.8 9.8 9.5 9.5 9.3 8.9 9.1 9.2 9.1 9.2
Uttarakhand 9.8 9.6 9.4 9.5 9.8 9.2 9.2 9.3 9.1 9.2
All India 10.2 10.2 10.2 10.2 10.3 10.1 10.2 10.2 10.3 10.1
P : Provisional
48
Annex Table - 4.1: Month-wise Average Daily Wage Rates for Agricultural Labour (Man)
(Rupees)
Daily Wage A. P. As- Bihar Guja- Hary- H. P. Karna- Kerala M. P. Mahar- Odisha Punjab Rajast- T. N. U. P. W. B.
Rates sam rat ana taka ashtra han
January, 2010 136.0 96.7 88.8 84.0 171.2 178.2 88.1 259.0 69.5 96.4 86.5 143.3 129.1 136.0 96.4 101.2
February 140.3 94.9 89.7 84.1 176.2 178.8 89.6 257.7 70.9 97.3 92.4 141.4 129.0 148.0 97.5 105.1
March 131.8 98.2 90.0 85.2 177.3 178.6 90.2 297.8 72.7 97.6 92.8 141.4 119.6 145.0 98.3 105.4
April 143.4 97.4 90.3 85.8 177.6 180.8 92.8 297.8 74.3 97.4 95.3 147.0 127.6 145.4 104.0 106.5
May 135.4 99.8 92.2 86.0 179.1 177.5 92.7 297.8 74.9 99.1 95.3 147.4 145.7 145.4 101.8 106.4
June 125.9 102.2 92.1 86.0 176.4 178.9 92.8 299.2 76.4 106.3 115.4 163.6 126.3 148.0 103.2 106.1
July 141.2 104.7 96.7 88.1 181.3 185.8 95.2 307.3 79.3 109.8 105.3 182.2 136.4 158.3 109.1 109.6
August 137.7 111.6 97.9 88.4 187.9 189.7 99.2 307.3 80.5 109.2 105.7 176.9 132.2 153.0 110.9 110.6
September 136.3 112.6 98.1 87.0 185.4 193.3 103.1 317.8 80.3 110.0 109.2 172.4 192.4 163.1 112.2 114.9
October 139.8 112.4 98.7 89.1 187.7 185.7 105.7 329.9 81.3 114.6 117.5 178.4 144.4 166.7 114.6 114.8
November 153.2 112.9 99.3 90.2 188.1 184.8 109.0 329.9 83.6 116.6 121.0 176.9 144.8 178.2 115.3 115.3
December 176.3 114.1 101.9 91.4 195.0 195.2 111.8 319.1 84.4 119.4 124.0 176.2 145.7 174.1 116.5 118.5
January, 2011 171.1 117.5 101.1 92.2 196.9 195.2 116.4 334.8 85.7 124.2 125.9 172.5 139.6 175.4 115.4 122.5
February 171.3 118.4 99.8 93.7 201.6 206.8 118.4 334.8 86.9 127.4 132.6 165.1 141.1 180.8 118.1 125.8
March 174.3 123.3 101.4 93.4 201.9 206.8 119.1 341.1 89.3 131.1 127.5 168.6 148.9 183.9 115.7 126.1
April 173.7 122.5 101.0 94.3 203.1 217.4 120.2 341.1 89.1 131.3 133.0 170.2 163.1 185.8 116.1 125.5
May 170.8 122.4 101.9 95.1 203.0 211.4 125.0 341.1 89.6 134.9 134.9 211.3 179.2 177.6 117.0 128.8
June 174.1 122.6 103.2 96.2 203.0 218.3 126.6 350.2 89.9 139.6 132.6 188.8 171.9 199.0 119.2 129.9
July 173.9 127.2 107.9 111.8 205.4 219.2 127.6 360.0 94.2 156.0 133.0 215.1 207.6 199.6 123.0 133.1
August 171.3 127.9 110.2 111.9 205.5 231.7 132.6 372.3 97.8 155.0 134.1 211.4 190.9 207.6 121.9 139.4
September 176.0 115.4 112.8 113.5 205.7 232.2 136.4 375.8 97.9 151.9 137.2 188.6 154.3 205.9 122.5 140.9
October 176.5 127.4 112.8 113.3 205.5 230.4 136.7 391.6 99.0 153.3 135.1 219.1 162.2 208.5 126.0 141.6
November 190.6 131.0 119.2 113.3 214.3 232.2 137.7 453.7 98.6 154.7 138.3 222.8 203.1 212.6 129.8 143.3
December 176.0 127.0 112.8 113.5 205.7 232.2 135.8 375.8 97.9 151.9 137.1 188.6 154.3 205.9 122.5 140.9
January, 2012 176.5 127.4 112.8 113.3 205.5 236.7 136.7 391.6 99.0 153.3 135.1 219.1 162.2 208.7 126.0 141.6
February 202.7 131.3 123.8 115.0 211.8 240.6 145.4 419.6 100.3 153.3 139.9 235.4 171.9 231.3 136.2 151.4
March 194.7 132.2 126.2 115.9 213.0 240.6 146.6 412.9 105.6 155.7 140.5 233.2 198.0 226.3 135.0 151.7
April 206.7 132.2 126.8 117.1 210.0 240.6 146.3 417.3 109.9 156.0 144.8 256.4 194.2 230.9 136.1 159.4
(Contd...)
49
price policy for
sugarcane
Annex Table - 4.1: Month-wise Average Daily Wage Rates for Agricultural Labour (Man)
(Rupees)
Daily Wage A. P. As- Bihar Guja- Hary- H. P. Karna- Kerala M. P. Mahar- Odisha Punjab Rajast- T. N. U. P. W. B.
Rates sam rat ana taka ashtra han
May 197.7 134.1 128.7 118.4 210.4 241.4 147.7 417.3 108.4 154.2 148.4 243.4 201.9 232.3 138.2 161.2
June 184.6 134.3 133.9 118.4 214.7 246.1 156.4 419.6 112.6 165.0 136.6 223.0 203.7 237.8 138.0 159.8
July 190.7 137.9 138.4 125.2 219.5 270.1 162.9 453.2 116.3 171.2 139.8 246.3 222.6 244.2 146.1 168.7
August 193.1 137.6 142.7 125.5 228.6 246.1 168.0 453.2 118.8 170.5 152.3 241.2 213.3 252.8 149.1 167.4
September 205.0 140.2 144.0 125.8 229.3 246.1 170.0 454.9 120.6 172.5 143.5 240.4 213.6 252.4 152.8 164.9
October 198.5 145.4 146.8 126.2 237.8 246.1 173.2 461.3 119.5 173.8 134.7 278.2 215.9 250.6 156.2 165.5
November 209.7 147.7 147.9 126.2 233.4 251.1 178.4 461.3 119.5 173.1 136.9 273.8 217.1 246.1 158.1 170.5
December 224.4 144.6 150.7 126.8 227.6 260.3 177.2 461.3 120.4 181.6 138.1 272.5 221.5 247.2 159.6 172.9
January, 2013 224.3 146.4 162.0 130.0 245.6 272.6 183.9 464.6 126.0 186.3 136.3 257.0 218.6 253.3 162.6 178.5
February 227.7 157.0 164.5 130.0 245.4 259.4 188.5 464.6 126.0 192.0 133.6 260.0 204.3 259.1 164.8 180.3
March 221.0 153.7 166.4 133.3 245.4 259.4 189.4 461.3 129.9 194.2 136.5 260.0 207.6 264.8 166.0 181.0
April 229.9 153.5 166.8 130.4 247.3 263.9 192.0 478.5 135.2 195.1 136.9 283.8 216.9 264.9 168.3 182.3
May 222.8 150.0 167.2 130.9 244.9 266.3 192.4 489.2 137.8 197.2 141.2 272.8 243.8 265.9 169.4 184.8
June 222.5 161.6 168.2 132.4 244.1 262.1 195.9 483.4 133.6 188.9 142.9 289.7 235.2 271.2 173.0 185.3
July 220.6 178.2 174.7 136.2 258.4 263.3 203.3 485.4 132.1 201.2 150.4 290.7 220.3 272.1 173.8 197.8
August 210.1 182.8 176.7 137.0 316.6 283.9 209.8 487.0 133.3 200.2 156.8 279.0 214.7 274.7 180.7 199.5
September 212.9 177.5 175.7 138.2 312.1 289.7 211.9 490.2 137.6 196.0 149.8 219.1 284.5 180.6 200.4
October 212.0 174.8 175.3 138.8 311.8 297.5 212.6 487.4 144.0 199.0 155.7 282.5 228.8 293.7 179.8 199.4
November 246.9 183.6 205.4 141.5 328.2 337.3 235.1 584.9 140.3 220.6 196.4 248.5 330.0 191.9 224.3
December 241.6 180.7 190.6 164.6 324.5 355.9 228.0 580.5 150.9 215.9 179.5 277.9 247.0 352.1 185.8 228.9
January, 2014 229.4 182.2 194.5 171.8 319.8 335.6 236.9 580.5 154.9 214.9 177.9 276.5 262.2 355.0 191.3 229.2
February 225.9 187.6 200.3 172.5 329.4 335.6 240.2 628.8 158.0 213.9 179.7 275.4 250.7 362.5 191.4 229.7
March 221.8 189.4 201.9 175.5 333.4 341.1 242.9 593.6 161.1 218.7 163.9 279.3 269.6 355.7 194.6 222.7
% change of 0.3 23.2 21.4 31.6 35.9 31.5 28.2 28.7 24.0 12.6 20.1 7.4 29.8 34.3 17.2 23.0
March,2014
over
March,2013
Note: Daily Wage rate - average of five operations i.e. Ploughing, Sowing, Weeding, Transplanting and Harvesting
Source: Labour Bureau, Ministry of Labour
(Concluded)
50
Annex Table - 4.2 : Farm Inputs - Wholesale Prices Index (Base 2004-05=100)
Electricity High Speed Light

Pesti- Non-electical Fod- Cattle
Month/Year Fertilisers (Irriga- Tractors Lubricants Diesel Diesel Oil
cides Machinery der Feed
tion) (HSD) (LDO)
Annual Average (July - June)
2011-12 137.2 136.8 116.0 123.7 137.9 235.3 167.8 259.2 195.9 190.3
2012-13 151.1 170.9 122.2 123.0 142.7 248.3 192.7 272.7 237.8 220.0
2013-14* 152.7 204.8 127.4 124.1 146.8 262.0 224.0 314.3 280.0 245.4
2010
January 108.9 117.4 110.2 117.7 123.5 174.5 133.9 184.3 182.3 173.1
February 109.0 117.4 110.2 118.0 123.5 174.5 136.6 185.3 176.5 175.6
March 109.8 117.4 111.8 118.6 123.7 174.5 144.6 180.1 199.1 175.8
April 114.6 117.4 114.6 118.8 123.5 174.5 145.6 187.1 182.2 177.0
May 115.2 126.2 113.6 117.6 123.9 194.2 145.6 187.3 165.2 177.0
June 115.3 126.2 113.6 117.8 124.0 194.2 147.4 174.9 171.3 177.0
July 115.3 126.2 113.4 117.9 124.0 194.2 153.5 174.7 173.4 177.6
August 116.5 126.2 113.3 117.9 124.0 194.2 153.5 170.6 180.7 177.8
September 116.5 126.2 113.4 118.0 124.2 194.2 153.5 174.3 186.5 178.0
October 116.3 126.2 113.7 118.0 125.0 194.2 153.5 182.3 192.7 178.2
November 116.6 126.2 114.0 118.2 125.6 194.2 153.6 190.9 190.7 178.6
December,2010 116.3 126.2 113.9 118.1 125.6 194.2 153.6 203.0 190.1 178.5
2011
January 117.8 128.1 112.9 121.0 128.0 194.2 153.6 217.1 193.9 181.3
February 120.3 128.1 113.1 122.9 128.3 194.2 153.6 218.6 198.5 181.4
March 120.7 128.1 113.9 123.2 128.9 194.2 153.6 228.3 205.8 180.5
April 122.9 128.1 114.1 123.6 131.4 214.0 153.6 246.3 200.6 183.8
May 125.2 128.1 113.9 123.1 134.8 220.8 153.6 256.8 176.8 181.2
June 125.7 128.1 113.8 123.5 134.8 220.8 157.1 240.2 179.5 180.0
July 127.0 128.1 114.5 123.5 136.0 221.8 167.8 232.6 182.7 184.9
August 127.9 128.1 114.6 123.5 136.4 231.2 167.8 240.4 188.2 186.3
September 130.4 133.8 114.8 123.8 137.2 236.6 167.8 241.4 189.8 186.4
October 134.9 135.7 114.6 124.2 137.5 236.6 167.8 245.8 191.2 186.4
November 137.6 135.7 114.6 125.9 137.8 236.6 167.8 243.1 196.9 186.2
December,2011 138.7 135.7 115.3 125.8 137.8 236.6 167.8 253.0 198.9 186.2
2012
January 139.5 135.7 115.9 123.6 137.9 236.6 167.8 267.9 198.5 187.3
February 140.1 135.7 115.9 124.0 138.0 236.6 167.8 267.5 197.4 191.8
March 141.1 135.7 116.2 122.8 138.4 236.6 167.8 289.3 202.2 197.3
(Contd...)
51
price policy for
sugarcane
Annex Table - 4.2 : Farm Inputs - Wholesale Prices Index (Base 2004-05=100)
Electricity High Speed Light

Pesti- Non-electical Fod- Cattle
Month/Year Fertilisers (Irriga- Tractors Lubricants Diesel Diesel Oil
cides Machinery der Feed
tion) (HSD) (LDO)
April 142.3 135.7 118.9 122.1 138.3 236.6 167.8 296.1 205.7 195.4
May 142.4 135.7 118.7 122.6 138.3 236.6 167.8 284.4 203.4 195.6
June 144.3 166.3 117.9 122.6 140.7 241.4 167.8 249.4 196.0 199.7
July 148.3 166.3 120.4 122.7 140.7 241.4 167.8 236.5 208.4 199.7
August 149.1 166.3 121.0 122.9 140.9 241.4 168.6 257.9 217.8 199.7
September 150.5 166.3 122.1 122.9 141.2 241.4 182.8 287.7 228.1 201.8
October 150.7 166.3 122.1 123.0 141.5 241.4 192.3 282.6 236.1 209.3
November 151.0 166.3 122.1 123.1 142.4 241.4 192.3 276.6 239.6 214.3
December,2012 152.1 166.3 122.3 123.0 143.7 253.3 192.3 278.4 237.5 225.2
2013
January 152.6 166.3 123 123 143.7 253.3 198.8 283.3 241.9 225.2
February 152.5 166.3 122.9 123.5 143.7 253.3 202.7 286.3 246.2 231.1
March 152.3 166.3 122.5 123.1 143.7 253.3 201.7 289.6 250.4 232.2
April 152.4 184.8 122 123 143.7 253.3 202.3 271.5 246 233.8
May 151.5 184.8 123 122.9 143.7 253.3 203.4 253.7 244.2 233.3
June 150.5 184.8 123.5 122.9 143.7 253.3 207 268.7 257.1 234.1
July 151.5 184.8 123.6 123.1 143.7 253.3 212 286.3 265.3 238.2
August 152 203 124.5 123.8 143.8 253.3 215.4 299.2 267.6 237.7
September 152.4 206.9 125.7 123.9 144.3 263.9 219.8 330.9 270.1 238.8
October 152.7 209.1 127.7 124.1 144.7 263.9 220.4 312.3 270.7 238.4
November 152.8 209.1 127.9 124.1 144.7 263.9 222.4 314.7 274.1 239
December,2013 152.6 205.5 127.5 124.3 145 263.9 225 325.6 278.3 246.6
2014
January 153 205.5 127.2 124.3 149 263.9 226.6 329.1 285.5 244.9
February 152.9 205.5 128.2 124.4 149.6 263.9 228.6 319.9 299 251.4
March 152.9 205.5 128.3 124.2 149 263.9 231.2 317.5 304 245.7
April 153.2 205.5 130.2 124.5 150.1 263.9 230 307.8 287.2 255.6
May 154 212.1 130.8 124.5 150.8 263.9 232.3 313.5 278 263.4
% change of
May,2014 over 1.7 14.8 6.3 1.3 4.9 4.2 14.2 23.6 13.8 12.9
May,2013
* For the year 2013-14 average is from July,2013 to May,2014

Source : Office of the Economic Adviser, Ministry of Commerce and Industry
(Concluded)
52
Annex Table-4.3: Projected Cost of Production (C2 & A2+FL)-Unadjusted for 9.5%
Recovery of Sugarcane for 2015-16 Sugar Season and Production Shares
Cost of Production (Rs./qtl.) Shares in

States
A2+FL C2 Production(%)
Karnataka 92 175 12
Uttarakhand 139 197 2
Tamil Nadu 146 187 11
Maharashtra 142 196 25
Andhra Pradesh 134 230 5
Uttar Pradesh 150 241 42
Haryana 134 257 2
All India Wtd. Avg. 140 215
Note:- Projected cost is exclusive of cost of transportation and crop insurance premium
53
price policy for
sugarcane
Annex Table - 4.4 : Sugarcane - Break-up of Cost of Cultivation

(Rs/Ha)
Andhra Pradesh Haryana Karnataka Maharashtra
Cost Items
2012-13 2011-12 2012-13 2011-12 2012-13 2011-12 2012-13 2011-12
Operational Cost 45402 78169 55075 58202 53738 58732 112827 101011
Human Labour
Casual 17814 38615 21215 21778 21537 24217 30059 26928
Attached 5723 2027 1648 790 0 52 3215 3154
Family 3820 8206 5010 5524 10886 6465 13005 13121
Total 27358 48849 27873 28092 32423 30734 46279 43202
Bullock Labour
Hired 2206 2850 293 92 1272 449 5032 3005
Owned 0 0 134 160 636 1585 2286 1468
Total 2206 2850 427 251 1907 2034 7318 4473
Machine Labour
Hired 693 2735 886 2411 1868 4931 17610 15167
Owned 0 195 2815 3272 1109 1016 271 1013
Total 693 2930 3701 5683 2977 5946 17882 16180
Seed 946 9472 10141 12995 1377 5332 6141 5062
Fertilisers and Manure
Fertilisers 6963 5398 4516 3644 8422 7432 17373 12075
Manure 194 874 161 337 1591 2020 1948 1777
Total 7157 6272 4677 3980 10013 9453 19321 13853
Insecticides 2525 1543 2174 1421 118 65 508 485
Irrigation charges 2071 2137 2986 2680 2401 2094 9506 12587
Interest on working capital 2446 4115 2945 3099 2521 3075 5872 5170
Miscellaneous 0 2 151 0 0 0 0 0
Fixed Cost 46442 46320 53061 53362 42517 35853 53136 45716
Rental value of owned land 27739 42155 47970 46899 37892 30392 43509 33531
Rent paid for leased-in land 15748 0 0 0 0 0 0 0
Land revenue,cesses & taxes 3 1 0 0 13 11 213 199
Depreciation on implements
169 273 449 269 277 326 902 1080
& Farm buildings
Interest on fixed capital 2783 3891 4642 6194 4335 5124 8512 10906
Total Cost 91844 124489 108136 111564 96254 94586 165962 146727
Source: DES, Ministry of Agriculture
(Contd)
54
Annex Table - 4.4 : Sugarcane - Break-up of Cost of Cultivation

(Rs/Ha)
Cost Items Tamil Nadu Uttar Pradesh Uttarakhand
2012-13 2011-12 2012-13 2011-12 2012-13 2011-12
Operational Cost 123142 104455 49844 42249 41599 40137
Human Labour
Casual 68752 58063 12549 10108 13092 13602
Attached 644 537 506 502 8 16
Family 18002 14746 13160 11168 10524 8245
Total 87397 73346 26215 21778 23624 21862
Bullock Labour
Hired 751 376 300 261 0 58
Owned 21 65 1283 1645 53 361
Total 772 441 1583 1906 53 419
Machine Labour
Hired 1695 2232 1058 907 439 667
Owned 109 343 401 337 2179 560
Total 1804 2575 1459 1244 2618 1227
Seed 9068 9544 7611 5472 7464 9039
Fertilisers and Manure
Fertilisers 10458 7095 3811 3070 2718 3098
Manure 3075 2371 507 648 0 0
Total 13533 9467 4318 3717 2718 3098
Insecticides 400 426 538 406 345 410
Irrigation charges 3982 3379 5963 5887 2925 2180
Interest on working capital 6185 5277 2158 1828 1828 1876
Miscellaneous 0 0 0 10 25 25
Fixed Cost 34458 29386 38807 36301 26003 27055
Rental value of owned land 26632 22315 32157 30221 20912 19908
Rent paid for leased-in land 9 12 161 50 0 0
Land revenue,cesses & taxes 13 10 23 21 15 17
Depreciation on implements & Farm 678 599 1020 810 710 1006
buildings
Interest on fixed capital 7125 6450 5445 5199 4367 6124
Total Cost 157600 133841 88650 78549 67602 67192
Source: DES, Ministry of Agriculture
(Concluded)
55
price policy for
sugarcane
Annex Table - 5.1: All India Average Annual Growth Rates of Sugarcane, 1992-97 to 2013-14
(Percent)
Particulars Eighth Plan Ninth Plan Tenth Plan Eleventh Plan Twelfth Plan
(1992-1997) (1997-2002) (2002-2007) (2007- 2012) (2012-2014)*
Area
Growth 1.9 1.2 4.0 0.0 -0.2
CV 8.8 4.7 13.4 8.4 0.3
Production
Growth 2.2 1.4 4.9 1.0 -1.7
CV 10.5 2.8 17.7 10.6 1.5
Productivity
Growth 0.2 0.3 0.7 0.9 -1.5
CV 4.0 2.5 5.6 3.9 1.2
Notes: CV: Coefficient of Variation,

* Data is available for 2012-13 and 2013-14 period only
Source: DES
price policy for sugarcane 2015-16 Sugar Season
56
Annex Table - 5.2 : Water Productivity- Consumption of Water Per Kg

of Sugar Produced, TE 2013-14
(litres) in cane for production of one kg of

Water Requirement (lakh litres of irriga-
Normalising land productivity for crop
Production of sugar (q/ha) {col.(9)*col.

tion) per ha. [7.5 times no. of standard
Height of Standard Irrigation Column
duration {Q/(Ha*month)} {col.(9)/col.
duration & water{Q/(Ha*month*lakh

No. of standard irrigations of 7.5 cms
Crop duration (months)
Relative prod. (% Share)
liters)}{col.(12)/col. (7)}
sugar [{col.(7)/col.(15)}
Relative area (% Share)
Productivity (Qtl./Ha)
Production (lakh MT)

State / Variety of cane
Water Consumption
Recovery Rate (%)
Area (Lakh ha)
*100000 /100]
each) per ha.
irrigations]
(14)}/100
Land
(3)}
S.N
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
I Andhra Pradesh
1 87A298 10.5 0.77 38.9 27 202.5 7.5 802.3 61.6 39.0 76.4 0.38 11.0 88.3 2295
2 Co86032/ 2003V46 11.5 0.77 38.9 27 202.5 7.5 802.3 61.6 39.0 69.8 0.34 11.0 88.3 2295
3 87A380 10 0.26 13.1 27 202.5 7.5 792.8 20.5 13.0 79.3 0.39 13.0 103.1 1965
4 91V83/86V96/83A30 11.5 0.10 5.2 27 202.5 7.5 804.2 8.2 5.2 69.9 0.35 12.5 100.5 2014
5 Co7805 /98A22/ 2001A63 10 0.08 3.9 27 202.5 7.5 797.9 6.1 3.9 79.8 0.39 10.5 83.8 2417
AP (Total/Wt. Average) 10.9 1.97 100.0 27.0 202.5 7.5 801.0 158.1 100.0 73.8 0.36 11.3 90.7 2234
II Bihar 12.0 2.5 100.0 5.0 37.5 7.5 512.1 128.5 100.0 42.7 1.14 8.9 45.6 822
III Karnataka
1 Co86032 13.5 1.7 41.2 35.0 262.5 7.5 799.9 139.9 38.0 59.2 0.2 11.0 88.0 2983
2 Co62175 13.5 1.0 22.6 35.0 262.5 7.5 960.1 92.0 25.0 71.1 0.3 9.0 86.4 3038
3 CoC671 11.0 0.4 10.5 30.0 225.0 7.5 744.7 33.1 9.0 67.7 0.3 11.5 85.6 2627
4 Co8011 13.5 0.3 7.0 30.0 225.0 7.5 1117.1 33.1 9.0 82.7 0.4 10.5 117.3 1918
5 Co740 13.5 0.1 3.5 35.0 262.5 7.5 1241.2 18.4 5.0 91.9 0.4 10.5 130.3 2014
6 Co91010 13.5 0.1 3.5 35.0 262.5 7.5 993.0 14.7 4.0 73.6 0.3 10.0 99.3 2644
7 Others 12.5 0.5 11.9 35.0 262.5 7.5 730.5 36.8 10.0 58.4 0.2 10.0 73.0 3593
Kar (Wt. Average) 13.1 4.3 100.0 34.1 256.0 7.5 866.3 368.2 100.0 66.0 0.3 10.3 89.5 2859
IV Maharashtra
1 Adsali 17.0 2.4 25.0 32.5 243.8 7.5 1122.0 270.4 35.0 66.0 0.3 12.3 138.0 1766
2 Pre-Seasonal 14.5 2.2 23.0 27.5 206.3 7.5 836.2 185.4 24.0 57.7 0.3 12.0 100.3 2055
3 Suru 12.0 1.7 18.0 22.5 168.8 7.5 667.8 115.9 15.0 55.7 0.3 11.5 76.5 2207
4 Ratoon 11.0 3.3 34.0 22.5 168.8 7.5 612.8 200.9 26.0 55.7 0.3 10.5 64.3 2622
Maha (Wt. Average) 13.5 9.6 100.0 26.2 196.1 7.5 801.4 772.6 100.0 59.4 0.3 11.6 93.2 2104
(Contd...)
57
price policy for
sugarcane
Annex Table - 5.2 : Water Productivity- Consumption of Water Per Kg

of Sugar Produced, TE 2013-14
(litres) in cane for production of one kg of

Water Requirement (lakh litres of irriga-
Production of sugar (q/ha) {col.(9)*col.

tion) per ha. [7.5 times no. of standard
Height of Standard Irrigation Column
duration {Q/(Ha*month)} {col.(9)/col.
duration & water{Q/(Ha*month*lakh

No. of standard irrigations of 7.5 cms
Crop duration (months)
Relative prod. (% Share)
liters)}{col.(12)/col. (7)}
sugar [{col.(7)/col.(15)}
Relative area (% Share)
Productivity (Qtl./Ha)
Production (lakh MT)

State / Variety of cane
Water Consumption
Recovery Rate (%)
Area (Lakh ha)
*100000 /100]
each) per ha.
irrigations]
(14)}/100
Land
(3)}
S.N
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
V Tamil Nadu
1 Co 86032 (E) 11.0 2.6 75 40 300.0 8.0 1027.3 263.5 60.0 93.4 0.3 13.0 133.5 2246
2 Co 99004 (E) 11.0 0.1 2 38 285.0 7.6 1052.6 7.2 4.0 95.7 0.3 12.6 132.6 2149
3 Co 99006 (ML) 11.0 0.1 2 38 285.0 7.6 994.2 6.8 4.0 90.4 0.3 13.0 128.7 2214
4 CoC 24 (ML) 10.0 0.2 5 38 285.0 7.6 1017.5 17.4 8.0 101.8 0.4 12.8 130.4 2185
5 CoSi 7 (E) 10.0 0.2 5 38 285.0 7.6 970.8 16.6 8.0 97.1 0.3 13.1 126.7 2250
6 CoG 5 (E) 10.0 0.2 5 40 300.0 8.0 974.0 16.7 7.0 97.4 0.3 12.8 124.7 2406
7 Co 94008 (ML) 10.0 0.2 6 38 285.0 7.6 1023.4 21.0 9.0 102.3 0.4 13.0 133.0 2142
TN (wt. Average) 10.8 3.4 100.0 39.6 297.0 7.9 1020.9 349.1 100.0 94.6 0.3 13.0 132.3 2245
VI UP
1 Plantation 10.0 1.4 62.0 8.0 60.0 7.5 734.5 101.1 73.0 73.4 1.2 9.5 69.8 860
2 Ratoon 9.0 0.9 38.0 7.0 52.5 7.5 401.7 37.5 27.0 44.6 0.9 8.7 34.7 1511
UP (Wt. Average) 9.6 2.3 100.0 7.6 57.2 7.5 599.5 138.5 100.0 62.3 1.1 9.3 55.6 1028
All-India (Wt. Average) 50.2 3502.1
Source: State Governments (Concluded)

58
Annex Table - 5.3: Benchmarking Sugarcane Productivity, Production Shares

& Efficiency Gaps
Country/State Yield (Tn/Ha) Production Share (%) Efficiency Gap (%)
Colombia 109.4 2.2 0.0
Guatemala 89.4 1.2 18.3
Australia 78.7 1.5 28.1
Brazil 76.6 40.5 30.0
Argentina 74.2 1.5 32.2
Thailand 73.6 4.9 32.7
USA 73.6 1.5 32.7
Philippines 72.1 1.6 34.1
Mexico 70.2 2.8 35.8
India 69.2 18.3 36.8
World 71.1 100.0 35.1
TN 105.8 10.2 0.0
Karnataka 89.4 10.9 15.6
Maharashtra 81.5 22.8 23.0
Andhra Pradesh 79.7 4.5 24.7
Uttar Pradesh 58.8 38.4 44.4
All India 70.0 100.0 33.8
Source: FAO, DES

59
price policy for
sugarcane
Maps
60
61
price policy for
sugarcane
62
63
price policy for
sugarcane
64
Government of India
New Delhi
August 2014

Sugar Pricing

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price policy

Commission for Agricultural Costs and Prices

Commission for Agricultural Costs and Prices

Preface and Acknowledgements

The report entitled PriceThe Policy for Sugarcane:

14th August, 2014

3. Trade Competitiveness of Indian Sugar 14

State-wise Productivities of Sugarcane 31

FRP Fair and Remunerative Price

Table-1.1 Cane Price Arrears, 2008-09 to 2013-14 5

Table-2.1 Balance Sheet of Sugar (Sugar Season-October to September) 9

Table-2.2 SMP/FRP as a Percentage of Value of Sugar -All India 11

Table-2.3 Cane Prices Paid To Farmers in UP as a Percentage of Value of Sugar 12

Table-3.1 Forecast for International Prices of Sugar 19

Table-4.2 Projected Costs of Sugarcane for 2015-16 Sugar Season 24

Table-4.3 Inter-Crop Price Parity in Returns 26

Table-5.1 District-Level Yield-bands of Sugarcane in Major Producing States, 2013-14 33

Chart No. Topic Page No.

List of Annex Tables

Table-1.1 Sugarcane - Area, Production and Yield 44

Table-1.2 State-wise Production of Sugar 46

Table-2.1 Average Recovery of Sugar from Sugarcane 47

Table-4.2 Farm Inputs - Wholesale Prices Index (Base 2004-05=100) 50

Table-4.4 Sugarcane - Break-up of Cost of Cultivation 53

Table-5.2 Water Productivity- Consumption of Water Per Kg of Sugar Produced, TE 2013-14 56

Table-5.3 Benchmarking Sugarcane Productivity, Production Shares and Efficiency Gaps 58

District-wise Map of States

Price Policy Recommendations

Chart-1.1: Production of Sugarcane and Sugar in India, 2000-01 to 2013-14

Sugar ( Million Tonnes)

Sources: DES and Directorate of Sugar, DFPD

Outlook for 2014-15

Outlook for 2014-15

Source: Directorate of Sugar, DFPD

Table-1.1: Cane Price Arrears, 2008-09 to 2013-14

Source: Directorate of Sugar, DFPD

Structure of the Report

Demand Supply Situation and Price Policy

Sources: DES, Directorate of Sugar, DFPD

Table-2.1: Balance Sheet of Sugar

(Lakh tonnes, Percent)

Sugarcane Pricing Policy

Demand Supply Situation and Price Policy

Source: Directorate of Sugar, DFPD

Table-2.2: SMP/FRP as a Percentage of Value of Sugar -All India

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

Table-2.3: Cane Prices Paid To Farmers in UP as a Percentage of Value of Sugar

Demand Supply Situation and Price Policy

Hybrid Approach : Revenue Sharing Formula with FRP

Chart-3.1: Major Producers of Sugar, TE 2013-14

3.3 As per USDA, global export of sugar in TE 2013-14 China

Chart-3.2: Major Exporters and Importers of Sugar, TE 2013-14

Indias Trade in50Sugar 10000

Chart-3.3 (a): Indias Exports of Sugar, 2002-03 to 2013-14

Trade Competitiveness of Indian Sugar

Chart-3.3(b): Indias Imports of Sugar, 2002-03 to 2013-14

Trade Competitiveness of Indian Sugar

Chart-3.4: International Prices versus Domestic Wholesale Prices of Sugar

Table-3.1: Forecast for International Prices of Sugar

Commodity Price Forecast (US $/tonne)

Source: OECD- FAO Agricultural Outlook for 2014-2023.

Costs and Profitability of Sugarcane during 2010-11 to 2012-13

Table-4.1: Gross and Net Returns of Sugarcane

Labour and Input Price Movement

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