Centre drafts revamp of six-decade-old Sugarcane Control Order; seeks comments till May 20

The Centre has released a draft to overhaul the nearly six-decade-old Sugarcane (Control) Order, 1966, aiming to simplify regulations and align the framework with changes in the sugar sector. Comments and objections are being sought from stakeholders regarding the new draft titled Sugarcane (Control) Order, 2026, till May 20.

The move comes as part of a broader effort to modernise the regulatory ecosystem governing sugarcane production, pricing and distribution, while reducing complexities and improving transparency across the value chain.

Focus on simplification and transparency

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According to the draft, the government intends to ease licensing, stock and distribution-related norms in the sugar industry. The objective is to create a more business-friendly environment by reducing excessive controls on production, storage and sale of sugar and its by-products.

The proposed changes also seek to strike a balance between farmers, sugar mills and consumers, while encouraging higher investment and improving competitiveness in the sector.

FRP system to continue

The draft provides its main focus through the ongoing implementation of the Fair and Remunerative Price (FRP) system which applies to sugarcane. The Centre will continue to fix the minimum price payable to farmers, taking into account factors such as cost of production, returns from alternative crops, sugar prices and by-product realisations.

The draft prohibits sugar mills from buying sugarcane at prices lower than the Fair Remunerative Price. This regulation ensures that farmers will receive income protection.

Stronger payment discipline for mills

The suggested order retains strict stipulations regarding on-time payment to the farmers even as it strives to establish good payment channels between the mills and the growers. The sugar mills will be mandated to pay the growers their dues within 14 days from the time of delivery of the cane. Any arrears not paid after the deadline attracts an interest of 15 per cent annually.

The system permits recovery of unpaid dues as land revenue arrears through district authorities, which establishes stronger enforcement mechanisms for the protection of farmer interests.

Ethanol integration and industry expansion

Reflecting the sector’s shift towards diversification, ethanol production has been formally integrated into the definition of sugar mills and pricing considerations. The draft also specifies conversion norms linking ethanol output with sugar production for pricing purposes.

This inclusion is expected to support the government’s ethanol blending programme and provide mills with additional revenue streams.

Norms for setting up new mills

The draft retains restrictions on setting up new sugar mills within a 25-kilometre radius of existing units, although states can increase this distance with central approval.

Developers will be required to submit an Industrial Entrepreneur Memorandum (IEM) and provide a performance bank guarantee of Rs 2 crore. They must take effective steps within three years and commence production within five years, failing which the guarantee may be forfeited.

The proposal also clearly bars the sale or transfer of the IEM to any third party before the plant becomes operational. However, limited exemptions are allowed in specific cases such as court orders or insolvency proceedings under NCLT.

Regulatory oversight with flexibility

Although the draft aims at minimising the regulation burden, there are clauses that provide for regulation of the distribution of sugarcane by the government, setting aside areas for factories and regulating production in cases where such action is required. It also enables digital reporting and data sharing to improve compliance and monitoring.

Towards a new legal framework

The proposed order will replace the existing 1966 framework once finalised, marking a significant policy shift in a sector that has long been tightly regulated. The government demonstrates through its current approach that it intends to establish a more accessible system which still maintains protection for farmers' interests.

Now, with consultations being conducted, the shape of the new order is dependent upon the suggestions provided by different parties.