# _Indian Sugar and Sugarcane Policies_

Production of plantation white sugar in India started at the beginning of the century. As in other countries, sugar is a politically controversial commodity, with strong lobbies including the cane growers, public sector sugar mills, private sugar mills, cooperative sugar mills, khandsari producers, consumers of subsidized sugar, and legal and illegal distilleries using both pricecontrolled and black market molasses as well as gur. These pressures are reflected in various bureaucracies at both the central and state levels which also have independent interests of their own, in particular at the central level the Ministry of Food and Civil Supplies, the Food Corporation of India, the Public Distribution System, the Ministry of Agriculture, the State Trading Corporation, and agriculture and other ministries at the state level. Reflecting these pressures, both internal and external pricing and distribution are regulated by a plethora of government policies and interventions. I I

## _Policies on production and domestic distribution_

New and expansion investments in sugar milling in India have been directly regulated by the central government since 1951, under its industrial licensing powers, and the industry was not included in the 1991 reform which removed these controls from most other industries. There are also comprehensive controls both over the prices of sugar and molasses, and state government controls over the prices paid by the mills for cane. At times of excess sugar supply, the growers and millers demand intervention to prevent sugar prices from falling, while in times of excess demand, the government is pressed to keep consumer prices down. Just about any central government intervention in pursuit of these or other objectives is legal, as sugar is an "essential" commodity under the Essential Commodities Act of 1955. To ensure that minimum quantities are available at controlled prices for distribution to consumers, the government has followed different policies at various times. These policies have been applied to the sugar mills only: for practical purposes the khandsari and gur producers have been free of all regulatory controls and consequently have always had a considerable advantage over the mill sector of the industry.'<sup>2</sup>

- In 1949-50, the govenment introduced a system in which basic production quotas were fixed for each mill based on its performance during the preceding two years. One half of the production in excess of the basic quota could be sold on the free market, but the excess plus the fixed quota had to be sold to the government at controlled prices. The timing of permitted free market sales was regulated by a monthly release system applied to each mill. This system continued until 1960-61.

- In 1961-62, the government experimented with the removal of the fixed price quota but retained the monthly release system.

"For an overview of regulatory controls over the sugar industry see Goldar and Gulati(I 991) and references cited by them, in particular the 1985 study of the black economy (Acharya and Associates, 1985). See also Centre for International economics ( 1996).

12 For a detailed account of the policies summarized below, see Indian Sugar Mills Association, _Indian Sugar Year Book._ According to this, a few attempts have been made to regulate some aspects of the khandsari business but they appear to have had little impact in practice.

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