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India’s sugarcane economy stands at a paradoxical crossroads. It is politically influential yet structurally inequitable; policy-rich yet plagued by perennial farmer distress. Behind this contradiction lies the country’s unique sugarcane pricing system, one where the Minimum Support Price (MSP) is not merely indicative but legally binding. The Fair and Remunerative Price (FRP), a statutory version of MSP, is intended to safeguard farmers. However, when there is only one legal buyer—sugar mills—the pricing mechanism morphs from protection into illusion.

This illusion was further complicated in July 2025, when the Cabinet Committee on Economic Affairs (CCEA) approved a 4.41 per cent hike in FRP, raising it from Rs 340 to Rs 355 per quintal for the 2025–26 crushing season. The new FRP is linked to a basic recovery rate of 10.25 per cent, and offers a premium of Rs 3.47 per quintal for every 0.1 per cent increase in sugar recovery. While this appears to benefit farmers on paper, in practice, the structure remains fundamentally flawed. Pricing cannot be fair in a market devoid of competition.

“In the sugarcane fields of India, the green bounty sways with promise, yet behind this pastoral façade lies a tale of stifled autonomy, institutionalized inequity, and constitutional neglect. Bound by an ossified statutory regime and a web of monopolistic controls, the Indian sugarcane farmer stands fettered—not by the vagaries of monsoon alone, but by laws that deny both freedom of trade and dignity of livelihood “, stated Mahesh Zagade, IASx, Ex-Principal Secretary to Government of Maharashtra.

A Monopoly by Design: The Hidden Cost of India’s Cane Pricing Regime

“In much of India’s cane belt—from Belagavi to Baramati—sugarcane farmers face a brutal reality: They grow without choice, sell without bargaining power, and earn without transparency. It’s a textbook case of monopsony—one buyer, many sellers. That distorts everything. This lack of alternate channels forces farmers to grow cane not because it’s profitable, but because it’s the only crop with assured, albeit delayed, payment. Worse still, policies floated in boardrooms seldom reach the fields. The South India Sugar Mills Association (SISMA), ISMA, and National Cooperative Sugar Federation sit on every panel—but 11 lakh cane labourers in Maharashtra remain unheard. It’s a top-down model that fails to reflect grassroots distress “, mentioned Raju Shetti, Ex Member of Parliament, Founder president, Swabhimani Kisan Sanghatana Maharashtra.

Sugarcane is unique among India’s agricultural commodities. Unlike rice, wheat, or pulses, which the government may or may not procure, sugarcane must be purchased at or above the FRP—mandatorily—by private or cooperative mills. In some states like Uttar Pradesh, Haryana, and Punjab, a higher State Advised Price (SAP) replaces FRP, making these among the world’s most expensive cane-producing regions.

However, the crucial difference lies not in the price level, but in the procurement framework. There is no APMC auction, no mandi, no direct-to-consumer or B2B trade option. The farmer’s only customer is the mill. Whether public or private, cooperative or corporate, the mill owns the market—and the farmer has no exit. “At the heart of this structural malaise lies an archaic legal framework: the Sugarcane (Control) Order, 1966, the Essential Commodities Act, 1955, and the myriad Cane Reservation Orders issued by State Governments. These instruments collectively mandate that farmers sell their produce to specific mills within geographically bound zones, forbidding competition and extinguishing choice. The result is a legalized monopoly where the sugar mill, not the market, dictates the fate of the farmer’s labour “, added Mahesh Zagade.

From Zoning to Recovery: Reforming the Institutional Framework in Sugar Heartlands

The twin sugar powerhouses of Maharashtra and Uttar Pradesh contribute over 60 per cent of India’s sugar production. Yet, both states underscore the enduring tension between scale and equity in India’s cane economy. In Maharashtra, zoning regulations bind farmers to designated mills, effectively curbing trade mobility and stifling competitive price discovery. In western Uttar Pradesh, murmurs of cartel-like coordination persist, with mills reportedly deferring payments or resisting SAP revisions—prompting state intervention to cushion discontent.

Amid these dynamics, the plight of Maharashtra’s 1.1 million seasonal sugarcane workers remains largely unacknowledged. Operating without formal recognition or inclusion in welfare schemes, these labourers remain invisible in policy calculus—excluded from the value chain’s gains and exposed to its volatility. Farmers too are beholden to mill-appointed contractors for harvesting and transportation, often absorbing unpredictable costs without recourse or negotiation.

As farmer compensation is directly tied to sugar recovery rates, even a marginal underestimation can translate into significant income loss—up to Rs 341 per tonne for a 1 per cent deviation. Yet, in the absence of independent laboratory access or transparent verification protocols, farmers are left navigating opacity.

“In this framework, the Central Government’s Fair and Remunerative Price (FRP) and States’ additional State Advised Price (SAP) are not safeguards but blunt instruments—intended as shields, they have become shackles. Price discovery is rendered impossible; payments are delayed for months; and worst of all, the farmer is denied the most basic right of economic agency,”, added Zagade.

Ethanol: A Game-Changer Trapped in an Old Game

India’s Ethanol Blending Programme (EBP), which targets 20 per cent ethanol in petrol by 2025–26, was supposed to diversify revenue streams and ease mill liquidity. Mills now earn from ethanol produced via B-heavy molasses or sugarcane juice, often fetching Rs 60 – Rs 66 per litre under government-set prices.

However, the benefits bypass the farmer. Cane is still routed through mills, and farmers cannot sell directly to ethanol units or distilleries. As Raju Shetti rightly points out, “Ethanol is a by-product in revenue-sharing, so the farmer sees no gain. The entire value addition accrues to mills. While most crops today can be traded on electronic platforms like eNAM, sugarcane remains tethered to archaic procurement models. Why? Because mills—not markets—determine the flow of cane.”

Identifying further bottle necks in the process, Mahesh Zagade expressed his concern regarding sugarcane remaining excluded from e-NAM, thereby gradually getting stranded in a legislative no-man’s land.

“Even as the ethanol blending policy under the National Bio-Energy Programme opens up alternate industrial demand, legal bottlenecks prevent farmers from engaging directly with ethanol units. This regime is not merely inefficient—it is unconstitutional. The denial of market access violates Article 19(1)(g), the right to practice any profession or carry on any trade. The absence of payment certainty and a lack of grievance redressal mechanisms strike at Article 21, the right to livelihood with dignity. The enforced monopoly, with no rational classification or compelling state interest, is an affront to Article 14, which guarantees equality before the law. The edifice rests on outdated assumptions of state benevolence while ignoring the lived experience of systemic exploitation “, he opined.

No regulatory pathway currently exists for farmer-producer organisations (FPOs) to set up decentralized ethanol units. Nor are there credit lines or infrastructure schemes to support farmer-led jaggery or syrup ventures—despite their viability in states like Karnataka and Tamil Nadu.

Reform Deferred: Why Market Freedom Eludes Cane Farmers

Several systemic factors continue to constrain India’s sugarcane economy. Zoning laws under the Sugarcane (Control) Order assign farmers to specific mills, effectively barring inter-mill competition and restricting free trade. The crop is also excluded from electronic National Agriculture Market (eNAM), leaving farmers without a platform for real-time bidding or auctions. Logistically, sugarcane must be crushed within 24 to 36 hours of harvest. This perishability forces farmers to depend on mill-controlled transport systems, deepening their vulnerability.

Crucially, the legal structure of a monopsony prevents farmers from entering into direct agreements with ethanol units, jaggery producers, or aggregators. While crops like cotton or maize benefit from a more liberalised procurement ecosystem, sugarcane remains confined within a command-and-control regime designed for an earlier era.

Is Revenue Sharing the Way Forward?

Karnataka has piloted a revenue-sharing model, where farmers receive a percentage of the revenue earned from sugar and its by-products. This model, if transparently implemented, offers a dynamic alternative to the rigid FRP/SAP structure. Quoting Zagade, “In contrast, the Karnataka Model—linking farmer payments to actual revenue from sugar, molasses, and ethanol—offers a rational and equitable path forward. It acknowledges the farmer not as a passive supplier but as a stakeholder entitled to a fair share. Meanwhile, SAPs—politically inflated but economically unsustainable—have bankrupted several mills, leading to closures and arrears, thus punishing the very cultivator they purport to protect “.

However, farmer organisations remain wary. They fear variability and volatility, especially in the absence of trust or regulatory safeguards. Still, if supported by digital contracts, transparent price-discovery algorithms, and independent audits of recovery rates and ethanol revenues, this model could offer the best of both worlds—flexibility for mills and fair returns for farmers.

Technology can bridge the trust gap. Blockchain-linked smart contracts that record sugar recovery, ethanol realisation, and by-product sales can make revenue-sharing traceable and tamper-proof. If legally enforced, this model could gradually replace fixed pricing with a transparent, performance-based remuneration system.

From Courtroom to Cane Field: Navigating the New Norms of FRP

Sugar mills in Maharashtra now find themselves in a legal and administrative quandary over timely FRP payments. Two landmark developments in 2025 have upended the compliance regime: On July 10th, the Government of India clarified that FRP must be calculated using actual data from the current crushing season. In tandem, the High Court ruled that full FRP must be paid within 14 days of cane supply—abolishing the erstwhile two-installment mechanism.

This renders lump sum FRP payment obligatory, with no latitude for staggered disbursals. Compounding the challenge, the FRP must reflect real-time recovery rates and Harvesting & Transport (H&T) costs—eschewing past-season averages. However, mills do not possess validated data on recovery or costs early in the season, rendering compliance technically and financially burdensome.

Earlier, mills would pay FRP in two phases, with the initial installment based on average recoveries (e.g., 10.25 per cent or 9.50 per cent) and estimated H&T charges. Unfortunately, the new framework has ushered in administrative roadblocks. Recovery data becomes available only post-season. Over 50 per cent of mills now divert juice or molasses for ethanol, complicating recovery calculations. H&T costs are confirmed only after negotiations with contractors conclude.

In response, a phased FRP strategy has been proposed. Mills could issue an interim FRP based on the past three years’ average recovery and zone-specific H&T cost estimates, ensuring compliance with the 14-day mandate. Yet, without cart-wise recovery tracking or farm-level H&T cost data, full FRP within 14 days remains a logistical chimera under the current Sugarcane Control Order.

To bridge this chasm between legality and feasibility, farmer associations must be enlisted in co-creating a solution. They can help develop cart-level recovery estimation models with VSI, recommend zonal H&T benchmarks using empirical data, and lobby for interim regulatory flexibility. They should champion digital platforms for real-time FRP tracking and advocate for joint district-level monitoring committees to resolve disputes.

Additionally, mills must adopt real-time ethanol diversion tracking systems and digitised workflows for approvals. Risks such as financial strain on indebted mills, delayed data reconciliation, and absence of real-time cost metrics still loom large. But transparency, equity, and compliance are non-negotiable.

From Patronage to Participation: Reclaiming the Cooperative Spirit

India’s sugar cooperatives were originally designed to democratise ownership and empower producers. But over decades, many have succumbed to political capture. Boards are often dominated by local legislators, and decision-making is marred by cronyism. Financial stress, delayed audits, and opaque pricing have further weakened cooperative credibility.

To scale successful models, cooperative modernisation should be supported through equity infusions, access to ethanol tenders, and digitised management systems. Linking cooperatives to centralised ethanol procurement portals could unlock volumes and liquidity, bringing farmers into the revenue loop.

“Let every farmer install micro-crushers for jaggery or raw sugar. Let them bypass tankers and sell based on actual sugar recovery. Encourage small farmer-run mills with low capex and co-generation tie-ups. Big mills centralize power and delay payments. One crore workers depend on this sector. Include sugarcane labour under MGNREGA for harvesting support. Link them directly with state subsidy schemes to reduce exploitation. Today, B-heavy molasses are excluded from price calculation. That’s where mills make profits. If ethanol is the future, farmers must be part of its math”.

— Raju Shetti, Ex Member of Parliament, Founder president, Swabhimani Kisan Sanghatana Maharashtra

Reform Path: Toward a Freer, Fairer Cane Economy

The path to equity in the sugarcane market requires a shift from protectionism to participation. First, zoning restrictions must be repealed, allowing farmers to choose buyers across districts and enabling genuine price competition among mills. Second, legal amendments should permit direct cane sales to ethanol units, distilleries, and other processors. This would require new guidelines, credit access, and infrastructure support for FPOs and micro-units.

Third, recovery-linked pricing must become a national standard. It should be implemented with quarterly benchmarking, independent oversight, and real-time digital tracking. Payment slippages could then be flagged automatically, and farmer grievances addressed faster.

“ Reform is not merely a matter of administrative efficiency; it is a moral and constitutional imperative. The Government of India and the States must act in concert to amend the Sugarcane (Control) Order to permit free-market sales, include sugarcane in the electronic National Agriculture Market (e-NAM) with safeguards tailored to its perishability, and facilitate direct contracts between farmers and ethanol units as well as FPO-led processing enterprises. Additionally, a codified revenue-sharing formula must replace the ad hoc State Advised Prices (SAPs), ensuring transparency and market alignment. To insulate farmers from the volatility of global sugar and ethanol markets, a dedicated Price Stabilization Fund should be established. Until these structural reforms are enacted, the Indian sugarcane farmer will remain a toiler bound by invisible chains—labouring not for prosperity, but for subsistence under state-sanctioned duress. The time has come to break these chains and restore to the farmer what the Constitution solemnly promises: equality, liberty, and dignity.”

—– Mahesh Zagade, IASx, Ex-Principal Secretary to Government of Maharashtra

Additionally, reforming the Cane Area Reservation Policy to allow inter-zone competition could drastically improve efficiency. Farmer cooperatives need to be supported with training, market access tools, and digital governance protocols. Finally, a climate lens must inform future MSP strategies. Water-intensive cane varieties grown in arid zones should face disincentives, while intercropped or drip-irrigated cane could qualify for green bonuses.

Conclusion: Breaking the Statutory Cage

India’s sugarcane MSP is no longer just a pricing issue—it is a question of market freedom and producer agency. The illusion of statutory protection has shielded mills more than it has empowered farmers. With only one legal buyer, no price discovery, and arbitrary payment cycles, farmers are locked into a system that rewards compliance over competition.

Real reform demands a reimagined ecosystem—one where the cane farmer is no longer a supplier to a monopolist but a player in a diversified, competitive, and transparent value chain. Whether through ethanol-led procurement, revenue-sharing, or FPO-driven decentralisation, the road to fair pricing lies not in tweaking FRP, but in dismantling the monopoly it conceals.

Only then will the promise of MSP evolve from illusion to justice.

——– Suchetana Choudhury (suchetana.choudhuri@agrospectrumindia.com)