A Deep Dive into the Sugar (Control) Orders

By Dilip Patil

This analysis provides a detailed clause-by-clause comparison of the Sugar (Control) Order, 2025, with its predecessors from 1966 and 2018, highlighting the significant advancements and evolving priorities in India’s sugar regulation.

Clause 2: Definitions – Expanding the Scope for a Modern Industry

* 2025 Order: Radically expands the definition landscape to encompass a wide array of sugar types (bura, cube, icing, plantation white, raw, refined, khandsari, jaggery/gur), crucial by-products (molasses A/B/C-Heavy, bagasse, press mud, ethanol), key stakeholders (bulk consumer, food business/operator), and a clear categorization of sugar factory/khandsari mill based on capacity (>500 TCD) and worker count. Notably, it aligns these definitions with established FSSAI/BIS standards, reflecting a focus on quality and consumer safety.

* 1966 Order: Offered a more rudimentary set of definitions, primarily focusing on the core elements of “sugar,” “dealer,” and “producer.” It lacked the detailed classification of sugar varieties and by-products, with molasses mentioned indirectly through state-level controls like the UP Sheera Niyantran Adhiniyam, 1964.

* 2018 Order: Largely mirrored the 1966 Order in its definitional scope, primarily centering on “sugar,” “dealer,” and “producer” in the context of Minimum Selling Price (MSP) enforcement. It did not introduce significant expansions to the definition framework.

* Analysis: The 2025 Order’s comprehensive definitions are a direct response to the evolving needs of the modern sugar industry, particularly the burgeoning ethanol sector and the formal integration of khandsari units. This granular approach enables more precise regulation of different sugar qualities and by-products, directly supporting initiatives like the Ethanol Blended Petrol (EBP) program (e.g., specifically defining molasses relevant to the ~0.42 billion Liters of ethanol contribution from khandsari). While all three orders define the fundamental terms, the 2025 iteration stands out for its breadth and alignment with quality control measures, consumer trust, and the EBP by standardizing terminology. The clear definition of khandsari units (>500 TCD, accounting for 66 of 373 units) facilitates accurate stock estimations (around 6–8 million tonnes of khandsari sugar).

Clause 5: Production and Diversion Control – Embracing Ethanol’s Prominence

* 2025 Order: Introduces a dual approach to production control. Sub-clause (1) mandates the submission of an Industrial Entrepreneur Memorandum (IEM) for the production of sugar and its by-products, signifying a move towards structured industrial planning. Crucially, sub-clause (2) explicitly empowers the Central Government to regulate the diversion of sugarcane juice, molasses, or even sugar directly towards ethanol production, reflecting the strategic importance of the EBP program.

* 1966 Order: Primarily focused on controlling sugar production through a system of permits issued under the Essential Commodities Act (ECA). It did not include a requirement for IEM and addressed molasses diversion indirectly through varying state-level legislation, lacking a unified, ethanol-centric approach.

* 2018 Order: Notably absent of any production control mechanisms, its focus was squarely on the enforcement of the Minimum Selling Price. It contained no provisions for IEM or the regulation of diversion towards ethanol.

* Analysis: The 2025 Order marks a significant shift by introducing both IEM for production oversight and explicit regulatory power over ethanol diversion, directly aligning with the national EBP target (evident in the ~3.5 million tonnes of sugar projected for diversion in 2024–25). In contrast, the 1966 Order relied on production quotas, while the 2018 Order prioritized pricing. The IEM requirement ensures better governmental oversight of the ~534 sugar mills and 66 regulated khandsari units. The explicit ethanol regulation is a clear indication of the government’s commitment to the EBP’s ambitious 20% blending goal.

Clause 6: Sale, Storage, and Disposal – Balancing Control with Financial Needs

* 2025 Order: Stipulates that the sale or removal of sugar requires prior approval from the Central Government, maintaining a degree of control over market supply. However, it introduces a novel provision allowing sugar mills and regulated khandsari units (>500 TCD) to pledge their sugar stocks to Scheduled Banks and Non-Banking Financial Companies (NBFCs) for financial assistance, although the actual sale of this pledged stock still necessitates government permission.

* 1966 Order: Implemented a stringent system of permits for all aspects of sugar handling, including sale, storage, and movement (both inter-state and inter-provincial). It lacked any provisions facilitating the pledging of sugar stocks to financial institutions.

* 2018 Order: With its primary focus on MSP enforcement, this order placed less emphasis on direct controls over sale and storage. It also did not include any provisions regarding the pledging of sugar stocks.

* Analysis: The 2025 Order strikes a balance between maintaining government oversight on sugar supply and acknowledging the financial needs of mills and larger khandsari units by introducing the pledge provision – a feature absent in the previous orders.

While the 1966 Order exerted tighter control over movement, the 2018 Order prioritized price regulation. The 2025 approach aims to prevent market oversupply, thereby stabilizing prices. The requirement for khandsari stock reporting enhances market transparency, indirectly benefiting the ~50 million sugarcane farmers through more stable market conditions.

Clause 9: Minimum Selling Price (MSP) – A More Comprehensive Approach to Viability

* 2025 Order: Significantly strengthens the MSP regime by outlining a more comprehensive calculation methodology. It mandates that the MSP must factor in the Fair and Remunerative Price (FRP) paid to farmers, the average cost of sugar conversion, and crucially, the revenue generated from by-products such as bagasse, molasses, and press mud. This provision applies to both sugar mills and regulated khandsari units.

* 1966 Order: Did not include any provisions for a Minimum Selling Price. Price controls were primarily managed through the broader powers of the Essential Commodities Act, lacking a structured formula. The revenue from by-products was not explicitly considered in any price-setting mechanism.

* 2018 Order: Introduced the concept of MSP with the primary objective of ensuring the financial viability of sugar mills and facilitating the timely payment of FRP to sugarcane farmers. While it considered the cost of cane, the explicit inclusion of by-product revenue in the MSP calculation was less defined.

* Analysis: The 2025 Order’s approach to MSP calculation is more sophisticated, explicitly recognizing the economic contribution of by-products, particularly molasses which is vital for the EBP program. This marks an evolution from the 1966 Order’s lack of MSP and the 2018 Order’s less detailed framework. Both the 2018 and 2025 Orders establish a clear link between the MSP and the payments to farmers (FRP). This comprehensive MSP calculation aims to ensure the financial sustainability of both sugar mills and regulated khandsari units, ultimately supporting the timely payment of FRP to the ~50 million sugarcane farmers.

Clause 10: Movement of Sugar – Balancing Control with Modern Needs

* 2025 Order: Reinforces the requirement for permits for the transportation of sugar, maintaining a level of oversight on its distribution. Notably, it introduces a provision for the use of military credit notes to facilitate the supply of sugar to defence establishments, adding a layer of flexibility for strategic needs.

* 1966 Order: Mandated permits for the movement of sugar, particularly for inter-state and inter-provincial transport, reflecting a more restrictive approach in a post-independence context. It did not include any specific provisions for military credit notes.

* 2018 Order: While focused on MSP enforcement, it touched upon movement controls as a means to regulate supply and prices but was less explicit on the permit system itself.

* Analysis: The 2025 Order’s introduction of military credit notes is a novel addition, tailored to meet specific strategic supply requirements. While the 1966 Order employed a stricter permit regime, the 2018 Order’s focus was more on price regulation. The 2025 approach aims to ensure a controlled distribution of sugar, thereby stabilizing domestic supply. This controlled movement also indirectly supports the EBP program by ensuring the availability of sugar for both consumption and potential ethanol diversion.

Clause 11: Quality Control and Reprocessing – A New Emphasis on Standards

* 2025 Order: Introduces significant provisions for quality control, empowering the government to mandate the reprocessing of sub-standard sugar. It also allows for the restriction of such sub-standard sugar to bulk consumers, aligning with Indian Sugar Standards.

* 1966 Order: Contained no specific provisions addressing the quality control or reprocessing of sugar. The focus was primarily on managing the quantity and distribution of sugar.

* 2018 Order: Similarly, the 2018 Order did not prioritize quality control or reprocessing, its main concern being the enforcement of the MSP.

* Analysis: The 2025 Order marks a clear departure from its predecessors by explicitly incorporating quality standards, a crucial aspect absent in both the 1966 and 2018 Orders. This alignment with FSSAI and BIS standards is intended to enhance consumer trust and ensure the quality of sugar available in the market, including khandsari sugar. This focus on quality also has the potential to improve India’s competitiveness in the export market.

Clause 12: Digital Compliance and Data Submission – Embracing Modern Technology

* 2025 Order: Mandates API (Application Programming Interface)-based digital reporting for sugar mills and regulated khandsari units (>500 TCD), signifying a move towards technological modernization. It explicitly states that the data submitted will be shared only with the government, ensuring data privacy. Additionally, it requires khandsari units to register on the National Single Window System.

* 1966 Order: Relied entirely on manual record-keeping and reporting under the Essential Commodities Act, lacking any provisions for digital data submission or data privacy.

* 2018 Order: Did not mandate digital reporting, relying on traditional methods of data collection from mills for MSP compliance.

* Analysis: The introduction of API-based digital reporting and the National Single Window System in the 2025 Order represents a significant modernization absent in the previous orders. The explicit mention of data privacy is also a contemporary addition. This digital shift aims to improve transparency and efficiency in data collection from the approximately 450 integrated sugar mills and 66 regulated khandsari units, facilitating better tracking of molasses supply for the EBP program (contributing to the ~5.5 billion liters of ethanol production). It also aims to reduce the risks of data leakages.

Clause 13: Inspection and Enforcement Powers – Strengthening Regulatory Oversight

* 2025 Order: Grants extensive powers for search, seizure, inspection, and sampling to authorized officials, explicitly referencing the Bharatiya Nagarik Suraksha Sanhita, 2023, as the legal framework for these actions. These powers apply to both sugar mills and khandsari units.

* 1966 Order: Provided for inspection powers under the Essential Commodities Act, but the details were less comprehensive, and it did not cite a specific legal code for search and seizure procedures.

* 2018 Order: Enforcement was primarily focused on ensuring compliance with the MSP under the ECA, with less detailed provisions regarding inspection protocols.

* Analysis: The 2025 Order’s explicit legal framework (Bharatiya Nagarik Suraksha Sanhita, 2023) and the broader scope of its enforcement powers mark a strengthening of regulatory oversight compared to the reliance on the ECA in the 1966 and 2018 Orders. This enhanced enforcement capability is crucial for ensuring compliance from both mills and khandsari units regarding FRP payments to farmers and the supply of ethanol for the EBP program. It also serves as a deterrent against illicit activities by unregulated khandsari units.

Clause 16: Legal Enforcement and Delegation – Enhancing Implementation

* 2025 Order: Specifies that violations of the order will be penalized under the Essential Commodities Act. Importantly, it explicitly empowers the central government to delegate its powers to state governments and other authorized officials, aiming for more effective implementation at the local level.

* 1966 Order: Stipulated penalties under the ECA but featured a more limited and less explicit framework for the delegation of powers to state authorities.

* 2018 Order: Primarily focused on penalties under the ECA for violations related to the MSP, with no significant changes to the delegation of powers.

* Analysis: The 2025 Order’s explicit provision for the delegation of central powers to states and authorized officials is a key step towards enhancing the on-the-ground implementation of the regulations, contrasting with the more centralized approaches of the 1966 and 2018 Orders. While all three orders rely on the ECA for penalizing violations, the 2025 Order’s focus on delegation aims to improve local enforcement of crucial aspects like FRP payments to the ~50 million farmers and compliance by khandsari units, ultimately supporting the EBP’s supply chain.

Key Observations on the Evolution of Sugar Control Orders:

* Modernization and Bioenergy Focus: The 2025 Order represents a significant modernization, integrating the regulation of ethanol (Clause 5(2)), mandating digital compliance (Clause 12), and formally including khandsari units in its regulatory ambit (Clauses 2, 6, 12).

This clearly aligns with India’s ambitious EBP target of 20% blending by 2025-26. In contrast, the 1966 Order was primarily concerned with addressing post-independence supply shortages and featured indirect control of molasses through state laws, lacking an ethanol-centric approach.

The 2018 Order indirectly supported the EBP through the MSP (Clause 3, 2018), aiming to stabilize mills but lacking explicit provisions for ethanol or digital infrastructure. The 2025 Order is transformative, directly supporting India’s net-zero emissions goals and energy security objectives.

* Khandsari Regulation: Bridging a Regulatory Gap: The 2025 Order marks a crucial step by bringing 66 larger khandsari units (>500 TCD, representing ~55,200 TCD capacity) under regulation for FRP compliance, stock reporting, and molasses management (contributing ~0.42 billion liters of ethanol). This addresses a significant gap in the previous orders, which lacked comprehensive oversight of the khandsari sector, leading to issues like cane competition and data inconsistencies regarding the estimated 6–8 million tonnes of khandsari sugar production. While this partial regulation is a positive step, the ~307 smaller, unregulated units (<500 TCD) remain a potential challenge.

* Farmer Welfare at the Forefront: The 2025 Order places a strong emphasis on the welfare of sugarcane farmers, mandating FRP (Clause 9) for both sugar mills and regulated khandsari units. This aims to reduce the persistent problem of cane arrears affecting the ~50 million farmers and directly supports the financial stability envisioned by the EBP program.

The 1966 Order offered basic protections for cane payments under the ECA but lacked a structured FRP mechanism, while the 2018 Order indirectly supported farmers by linking the MSP to FRP. The 2025 Order’s direct mandate strengthens farmer protections, which is critical for the rural economy, where 65% of the population resides.

* Embracing Digitization and Quality: Unlike the manual and quantity-focused approaches of the 1966 and 2018 Orders, the 2025 Order embraces modernization through API-based digital reporting (Clause 12) and the introduction of explicit quality standards for sugar (Clause 11). This shift aims to improve transparency, enhance consumer trust in sugar quality (including khandsari sugar), and boost India’s competitiveness in the global export market (which saw ~0.8 million tonnes of exports in 2024–25).

* Enhanced Enforcement Flexibility: The 2025 Order seeks to improve regulatory compliance through enhanced enforcement powers (Clause 13) and the explicit delegation of central powers to state authorities (Clause 16). This contrasts with the more rigid ECA-centric enforcement frameworks of the 1966 and 2018 Orders, aiming to support the effective implementation of FRP and ethanol supply regulations at the local level.

Relevance to Ethanol Blended Petrol (EBP) Programme and Khandsari Units:

* EBP Support: The 2025 Order directly supports the EBP program through Clauses 5(2) and 12, which regulate the diversion of sugarcane resources towards ethanol production and ensure the tracking of molasses supply. The regulated khandsari sector is expected to contribute approximately 0.42 billion liters of ethanol via molasses. This explicit focus on ethanol aligns the regulatory framework with the national goal of achieving 20% blending by 2025-26.

* Khandsari Regulation: Clauses 2, 6, and 12 of the 2025 Order bring 66 larger khandsari units under regulation, mandating FRP compliance and stock transparency – aspects entirely absent in the 1966 and 2018 Orders. While this enhances the EBP supply chain by formalizing a portion of the molasses production, the regulated units will face new compliance costs. The continued existence of a large number of unregulated smaller units remains a potential challenge for fair competition and data accuracy.

* Farmer Welfare: Clauses 9 and 12 of the 2025 Order directly address farmer welfare by mandating FRP for sugarcane supplied to both sugar mills and regulated khandsari units, aiming to reduce the long-standing issue of payment arrears affecting the ~50 million farmers. This represents a significant improvement over the basic protections of the 1966 Order and the indirect support through MSP in the 2018 Order, directly supporting the socio-economic goals of the EBP program in rural India (home to 65% of the population).

In conclusion, the Sugar (Control) Order, 2025, marks a significant leap forward from the 1966 and 2018 Orders. By explicitly integrating ethanol regulation, bringing a segment of the khandsari sector under its purview, mandating digital compliance, and prioritizing quality standards, it provides a more comprehensive and modern framework for India’s sugar industry.

Its strong emphasis on farmer welfare and its direct support for the Ethanol Blended Petrol program underscore its alignment with contemporary national priorities. However, the effectiveness of the Order will ultimately depend on robust enforcement mechanisms, particularly in addressing the challenges posed by the unregulated segment of the khandsari industry and ensuring a balanced approach to ethanol diversion, domestic sugar supply, and export considerations. This systematic comparison highlights the 2025 Order’s potential to modernize the sugar regulatory landscape to meet the evolving demands of bioenergy, farmer welfare, and market transparency in India.