Sugar or sucrose is a carbohydrate that is derived as an end product of the process called photosynthesis, a process from which plants convert sun’s energy to produce their food. Sugar is used by the plant cells as a source of energy.

Generally sugar is consumed to add sweet taste to many cuisines and recipes and also for preserving them. It is derived from the major sources of sugar i.e. sugarcane and sugarbeet when the juice of these resources is firstly evaporated and then processed with the help of a process named crystallization.

India has been known as the original home of sugarcane and sugar. India is the largest producer and consumer of sugar in the world, with Maharashtra contributing over one-third of country’s sugar output.

Indians knew the art of making sugar since the fourth century. However the advent of modern sugar industry in India dates back to mid 1930's when a few vacuum pan units were established in the sub-tropical belts of Uttar Pradesh and Bihar. Until the mid 50s, the sugar industry was almost wholly confined to the states of Uttar Pradesh and Bihar. After late fifties or early sixties the industry dispersed into Southern India, Western India and other parts of Northern India.

The sufficient and well distributed monsoon rains, rapid population growth and substantial increases in sugar production capacity have combined to make India the largest consumer and second largest producer of sugar in the world.

Indians by nature have a sweet tooth and sugar is a prime requirement in every household. Almost 75% of the sugar available in the open market is consumed by bulk consumers like bakeries, candy makers, sweet makers and soft drink manufacturers. Khandsari sugar is less refined and is typically consumed by sweet makers. Gur, an unrefined form of lumpy brown sugar, is mostly consumed in rural areas, with some quantities illegally diverted for alcohol production.

A rising trend in usage of Sugar is visualized because of greater urbanization and rising standard of living in India. Industrial consumption for sugar is also growing rapidly particularly from the food processing sector and sugar based bulk consumers such as soft drink and ice cream manufacturers.

The per capita consumption of total sugar (sugar, gur & khandsari) in the country has been increasing at a phenomenal rate.

The quantum of sugar produced by a mill is determined by the factors like daily crushing capacity, duration of crushing season and percentage of sugar recovery.

The crushing season in the country starts from October and reaches its peak in January before finally ending in March or April of the next year. But based on cane availability, the start of the crushing season may postponed by one to one and a half months in different states of the country. Example: In eastern UP crushing season starts only in November every year, about a month later than normal.

The period of November to March (150 days) is an ideal one for sugar recovery in general, more particularly in Bihar and Utter Pradesh. From April onwards, sugar recovery shows a downward trend and in June the percentage of sugar recovery comes down to lowest levels. The months of April, May and June are very hot in Uttar Pradesh, Bihar and Punjab. This period, would thus, accentuate the drying of sucrose content and leads to a lesser recovery of sugar.

Indian sugar industry has grown horizontally primarily because of GOI policy to support small size sugar factories by excluding them from the requirement of supplying sugar at lower prices for the PDS.

The sugar production in the country fluctuates widely based on sugarcane availability in the country. S-30 grade sugar has the maximum production in the country constituting around 72% of the total production. The remaining 24% is of M-30 and the rest is from L-30 and the other different grades under 29 series.

The crushing season in the country starts from October and reaches its peak in January before finally ending in March or April of the next year. During this period supply arrives in the market and resultantly prices starts falling.

Sugar prices in the country can be classified into two broad categories at the user end as free market prices and prices of sugar through public distribution system. The GOI announces PDS sugar prices based on levy sugar prices fixed by it and the subsidy to be provided through budgetary system.

The realization to sugar mills from government levy quota is called levy prices. Levy prices are fixed by the GOI based on SMP for the year. But usually levy prices are very low and fall below the cost of production. Therefore the producers are left with only free sale sugar quota to run the business profitably.Central Government fixes the Statutory Minimum Price (SMP) of sugarcane for each sugar season under the Sugarcane (Control) Order, 1966 for each sugar factory.

SMP is fixed on the basis of the recommendations of the commission on Agricultural Costs & Prices ( CACP ).Some State Governments announce State Advised Prices (SAP) for sugarcane for their sugar factories. SAPs are higher than SMP. SAPs are not fixed on any scientific basis. SAPs are not statutorily binding.