The Centre has released the draft Sugarcane (Control) Order 2026 to replace the 1966 regulations, aiming to reset the regulatory mechanism with a recognition of ethanol as a core output of sugar mills. The draft also includes khandsari sugar, or a healthier variant of the sweetener, under the fair and remunerative price regime.

Releasing the draft for wider consultation, the ministry of consumer affairs, food and public distribution has stated that due to  technological advancement, there are multiple changes in the sugarcane sector that necessitate the revamp of the existing order.

The order said sugar units producing ethanol directly from sugarcane juice, syrup and B-heavy molasses will see every 600 litres of bio-fuel they produce counted as equivalent to one tonne of sugar — a provision which would alter price compliance and production quotas.

Draft rules prohibit setting up new sugar factories

Industry sources said that the draft rules prohibit setting up of new sugar factories within the 25-km radius of an existing unit from the current norm of 15 km. Industry body Isma said it had sought inputs from members and would share them with the government in due course.

The draft order retains fair and remunerative price for sugarcane while mills must pay within 14 days of delivery and delayed payments by units attract interest at 15% per annum. The inclusion of ethanol-related definitions and the integration of by-product valuation – covering bagasse, molasses, and press mud – according to trade sources is indication of the government’s aim to align sugar policy with the country’s biofuel programme.

In May last year, the government brought units manufacturing khandsari sugar above a threshold size under the Sugar Control Order (SCO) 2025. “Right now, we are not accounting khandsari output in our total sugar production,” a food ministry official has stated while adding that currently there is not a mechanism to ascertain whether these units pay FRP while buying sugarcane from farmers.

The khandsari sugar industry has been seeing rising production. However, no official data is available on output of this variant of sugar. Out of the total estimated sugarcane production of 43.5 million tonne (MT) in 2024-25 crop year (July-June), around 13.5 MT of sugarcane was used for manufacturing jaggery, juices and khandsari.

Khandsari sugar is physically extracted from the liquid jaggery and does not undergo chemical treatment like refined white sugar. This variant of sugar is mostly manufactured by around 370 units in Uttar Pradesh, Bihar, and Maharashtra.