Centre weighs overhaul of sugar sector's rules to boost ethanol production, protect states

THe unification regime is finalising a wholesale modernize of regulations for the saccharify sector, expanding the framework to cover ethanol production, devolving more powers to states, and revising long-standing rules governing mill operations in the world’s second-largest sugar producer.The food ministry’s draft Sugarcane (Control) Order, 2026 proposes increasing the mandatory distance between two mills, known as the command area, from 15 km to 25 km. The rule is aimed at preventing mills from sourcing cane outside designated zones and competing for farmers’ produce.While Maharashtra, Punjab and Haryana already follow the 25-km norm, major producers such as Uttar Pradesh and Karnataka currently do not. The change has been a long-standing industry demand, reflecting shifts in cropping patterns.ALSO READ | Haryana projects 38% fall in sugarcane production in 2025-26The draft also brings ethanol production squarely within the sector’s regulatory ambit. Units producing ethanol from molasses, a byproduct of sugar, will be treated as part of the sugar industry. India has expanded ethanol output significantly under its E20 blending programme, which mandates mixing of the alcohol compound with petrol, with current capacity at about 20 billion litres annually. Under the proposed framework, 600 litres of ethanol will be treated as equivalent to one tonne of sugar for calculating total sector output.Industry representatives have broadly welcomed the changes. “We are still studying the changes but broadly, steps such as changing the distance between two mills and bringing khandsari units under the regulatory framework are welcome steps,” Deepak Ballani, the director-general of the Indian Sugar & Bio-energy Manufacturers’ Association (ISMA) said. Khandsari units are small, informal manufacturers of raw unrefined sugar.ALSO READ | Sugarcane-based intercropping should become new agricultural model for Uttar Pradesh: YogiMillers have to pay farmers a federally fixed guaranteed rate, known as the fair and remunerative price, currently set at ₹355 a quintal (100 kg). The new framework doesn’t propose any change to this pricing regime, which offers profitable earnings for the country’s nearly 50 million cane growers.Under the proposed changes, states will be empowered to take certain decisions, such as approval of capacity additions, which currently require federal clearances. The draft also retains provisions such as a 14-day payment deadline and 15% interest payable to farmers for delayed payments.ALSO READ | ₹68.5 per quintal sugarcane subsidy">Punjab cabinet okays ₹68.5 per quintal sugarcane subsidyThe reforms mark the most significant reset since 2012, when the UPA government scrapped the levy sugar system based on recommendations by economist C Rangarajan. Levy sugar referred to a mandatory quantity of their produce that millers had to sell the government at a discounted price for the public distribution system.The draft also proposes new approval processes factories and enforcement of millers’ distance rules as well as raising performance bank guarantees to ₹2 crore, all which will be under the oversight of an independent monitor. The draft reflects new search and seizure provisions in accordance with the Bharatiya Nagarik Suraksha Sanhita, 2023, the legislation that governs the country’s criminal justice system.