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Measures to address issues in Sugar industry

Measures to address issues in Sugar industry


  • GS 3 || Economy || Industries || Major Industries

 Why in news?

  • NITI Aayog has setup high-level committees to address the problems in the sugar industry.

 What are the issues in the sugar industry?

  • In India sugar industry’s woes are rooted in excessive government interference (read controls) and a total disconnect between the prices of input (sugarcane) and output (sugar).
  • The prices have seldom been allowed to be determined by the market and the net result is the periodic ups and downs in sugar production, prices and exports.
  • The present liquidity crunch in the sugar industry can also be attributed to surplus output, depressed prices and unviable exports.
  • It has, predictably, led to the accumulation of cane price arrears and consequential unrest among the cane
  • Though the government has, as usual, responded with various kinds of direct and indirect fiscal sops, including grants, interest subvention, tacit export subsidies and minimum ex-factory sale price, the crisis persists.

 What is NITI Aayog’s plan in this regard?

  • NITI Aayog has setup a 13-member task force panel to suggest long-term strategies to rationalize the sugar economy and align it with the global market.
  • The underlying objective is to reduce the burden on the exchequer due to the financial bail-out packages that the government has to repeatedly dole out to sustain the economic health of this Rs 800 billion agro-industry and avert piling up of unpaid cane price dues of the sugarcane growers.
  • The task force is also expected to suggest ways and means to mitigate the adverse impacts of sugarcane farming on the environment, notably groundwater.

 Rangarajan Committee

  • The lasting cure of this industry’s ills can be found in the report of the Rangarajan Committee, which has mooted wide-ranging reforms to free it of government clutches.
  • Though the Centre had implemented some of its recommendations, it had, at the same time, left some other reforms for the states to carry out but they have remained largely unimplemented.
  • The Centre, too, has re-imposed, some of the restrictions it had lifted earlier, thus, defeating the very purpose of sugar sector reforms.

 Way Ahead

  • The government urgently needs to introduce the revenue-sharing formula, suggested by the Rangarajan Committee, under which the mills are required to share with the farmers 70-75 per cent of the revenue earned from sugar and its byproducts.
  • By linking the prices in the market, this system allows the production of sugarcane as well as sugar to be dictated by the demand-supply dynamics of the local and global markets.
  • Since such an arrangement is acceptable to all stakeholders in this sector, there is little reason why it should not be implemented forthwith.
  • The NITI Aayog’s task force would serve a useful purpose only if it can come up with something better than this.
  • Apart from theseenvironmental issues which has received less attention needs to be taken care by promoting drip irrigation and water-efficient crop varieties and agronomic practices.

 NITI Aayog

  • The Government had replaced Planning Commission with institution NITI Aayog (National Institution for Transforming India). The reason had mentioned that Specific to the planning process, there is a need to separate as well as energize the distinct ‘process’ of governance from the ‘strategy’ of governance.
  • An important evolutionary change from the past will be replacing a centre-to-state one-way flow of policy by a genuine and continuing partnership with the states.
  • The institution must have the necessary resources, knowledge, skills and, ability to act with speed to provide the strategic policy vision for the government as well as deal with contingent issues.
  • Chairperson: Prime Minister of India
  • Governing Council: Comprising the Chief Ministers of all States and Lt. Governors of Union Territories.
  • Regional Councils: Will be formed to address specific issues and contingencies impacting more than one state or region.

 Agrarian Distress

  • India is mainly an agricultural country. Agriculture is the most important occupation of 60% of the population either directly or indirectly. It is the basic foundation of economic development.
  • The agriculture growth rate has been unsteady in the past and the events of farmer’s suicide due to distressed agriculture have led to various protests.
  • It is not merely a source of livelihood but a way of life. It is the main source of food, fodder and fuel.
  • Challenges/ Issues in the Indian farming system Monopoly procurement continues.
  • There is little progress in direct link between farmer and buyer.
  • Due to the fluctuations in the market forces of demand and supply farmers are facing price uncertainties.
  • Foreign direct investment in farm to fork chain is very restricted.
  • Half the farmers don’t have access to formal credit, since most of them don’t own the land that they till.
  • Contract farming remains virtually banned.
  • Land leasing is not possible (but done informally).
  • Moneylenders are taboo, even though they might be in the best position to address credit needs, albeit with proper regulation.
  • The farmer’s plight is full of woe, exposed to risks from prices, demand, weather, pests and whims of policy and regulation.
  • The government’s aim to double farm income in the next four years is a near impossible feat but signals the right intention.