Sugar Acts & Orders

Sugar Acts & Orders

Government of India
Ministry of Public Distribution and Consumer Affairs
Department of Sugar and Edible Oils
Directorate of Sugar

• Essential Commodities Act, 1955
• Sugar (Control) Order, 1966
• Sugarcane (Control) Order, 1966
• Levy Sugar Supply (Control) Order, 1979
• Sugar (Packing and Marking) Order, 1970
• Sugar Cess Act 1982
• Sugar Development Fund Act 1982
• Sugar Development Fund Rules 1983
• LSPEF Act, 1976

SUGAR

Sugar is covered under Essential Commodities Act, 1955 (ECA).

Essential Commodities Act, 1955 (Briefly EC ACT)

Sugar is a commodity covered under the Essential Commodities Act, 1955 and is subject to various controls in terms of the provisions of the said Act and the Rules made thereunder. The objective of the EC Act is to control the production, supply, distribution of and trade and commerce in the essential commodity.
The definition of 'sugar' occuring in sub-section(e) of Section 2 of the Act, inter alia, sugar or any sugar in crystalline or powdered form'. However, all the controls which are applicable to sugar produced through vacuum pan process by sugar mills, are not enforced in entirety on khandsari sugar at present.
Section 6 of the Act provisions for seizure/confiscation of the commodity by the District Collector. Section 7 deals with penalties for contravention of the provisions of any order made under Section 3 and Section 7A deals with the power to recover certain amounts as arrears of land revenue. Section 10 makes every offence punishable under the Act as cognizable and non-bailable.
Taking into consideration the unabated price rise during the years 1979 and 1980, certain special provisions were made for a temporary period of five years for dealing more effectively with persons indulging in anti-social activities like hoarding and black marketing and the evil of vicious inflationary prices.
Section 3(3C) of the EC Act makes specific provision with regard to the payment to be made for sugar sold by the producer in compliance of an order made under Section 3(2) (f) of the Act by the Central Government for supply of levy sugar. This Section lays down the guidelines for determination of price payable to the producer for levy sugar supplied by him. Under this sub-section, levy sugar price is required to be fixed by the Central Government having regard to -
(a) the minimum price fixed for sugarcane by the Central Government;
(b) the manufacturing cost of sugar;
(c) the duty or tax payable thereon; and
(d) the securing of a reasonable return on the capital employed in the business of manufacturing sugar.
It is also provided that different prices may be determined from time to time for different areas or factories or for different kinds of sugar.
Section 3 of the Act confers wide powers on the Central Government to make orders to provide for achieving the primary objective of exercising effective control to check inflationary trend in prices and to ensure equitable distribution of the essential commodity. The important orders issued in exercise of the powers conferred by Section 3 are:

SUGAR (CONTROL) ORDER, 1966

(i) The Sugar (Control) Order 1966 provides for power to the Government to regulate production of sugar, restrict sale etc. of sugar by producers, movement of sugar and quality of sugar, call for information from producer or recognised dealer, inspection, entry, search, sampling and seizure of sugar and delegation of powers conferred by the Sugar (Control) Order, 1966 to any officer or authority of the Central or State Government.
On the basis of the quarterly freesale quota decided by the Government, month-to-month release orders for sale of sugar in open market are issued under clause 5 of the Sugar (Control) Order, 1966.
SYNOPSIS Sugar (Control) Order, 1966
The important provisions contained in the Sugar (Control) Order, 1966 are as under :-
Licensing
Clause 3 deals with the power to regulate production of sugar through the grant of licence.
(Though the sugar industry has since been deleted from the list of industries requiring compulsory licensing under the provisions of the Industries (Development and Regulation) Act, 1951, a minimum distance of 15 km. Would continue to be observed between an existing sugar mill and a new mill. The enterpreneurs would be required to file an Industrial Entrepreneur Memoranda (IEM) with the Secretariat of Industrial Assistance in Ministry of Industry.)
Prohibition on sale of sugar
Clause 4 empowers the Central Government to direct that no producer shall sell or agree to sell or otherwise dispose of or deliver or agree to deliver any kind of sugar or remove from the bonded godowns of the factory except under and in accordance with a direction issued in writing by the Central Government.
Freesale release orders
In exercise of the powers conferred by this clause, Notification No. GSR 345(f)/ess.com/Sugar dated 4.6.1979 was issued prescribling the requirement of a written order for sale of sugar by factories. Month-toMonth release orders for sale of free sale sugar are, therefore, issued under clause 5 of the Sugar (Control) Order, 1966 to satisfy the requirement of 'a direction in writing by the Central Government' occurring in Clause 4 of the said Order.
Sugar Trade
Clause 5 of the Sugar (Control) Order, 1966 empowers the Central Government to issue directions to sugar producers or recognised dealers, from time to time, regarding production, maintenance of stock, storage, sale, grading, weighment, disposal etc. in exercise of such power, Central Government issues directions through notified orders -
(a) for regulating sale by sugar factories of a fixed percentage of each month, within a specified period, i.e. weekly/fortnightly as is deemed necessary.
(b) For fixing specific stock holding limits on sugar dealers, and
(c) For imposing restrictions on khandsari units regarding declaration of stocks and sale of stocks within specified periods.
Permit for transport of sugar
Clause 6 deals with grant of general or special permit for transport of sugar.
Regulation of quality of sugar
Clause 7 confers the power to regulate the quality of sugar in terms of Indian Sugar Standard Grades and to direct reprocessing of sugar not conforming to such standard grades.
Utilisation of levy sugar
Clause 9 deals with the utilisation of sugar taken delivery of in pursuance of a direction made under Section 3(2) (f) of the Essential Commodities Act and requires the submission of utilisation certificate to the Chief Director within fifteen days of taking delivery. Levy Sugar is covered in the sugar procured by Government under Section 3(2) (f) of the E-C-Act.
Inspection seizure etc.
Clause 11 deals with the power to inspection, entry, search, sampling, seizure etc.
Delegation of powers
Clause 15 deals with the delegation of powers conferred by the Sugar (Control) Order, 1966 to any officer or authority of the Central/State Government.
(The Sugar (Control) Order, 1966 as amended on 14th June 1999 also brings under its purview the importers and imported sugar.)

SUGARCANE (CONTROL) ORDER 1966

Sugarcane (Control) Order, 1966
Sugarcane (Control) Order, 1966 provides for price(SMP) for sugarcane purchased by sugar mills during each sugar season (Clause 3), payment of interest at 15% per annum on amounts due beyond 14 days of delivery of sugarcane at factory gate (Clause 3(3-A), payment of additional cane price to the growers (Clause 5-A) regulation of distribution and movement of sugarcane (Clause 6), licensing of power crushers and khandsari units and regulation, issue of directions to producers of khandsari sugar (Clause - 8), power to call for information etc. from producers (Clause - 9) power to entry, search and seizure (Clause 9-A) and delegation of powers conferred by the Sugar (Control) Order, 1966 to any officer or authority of the Central or State Government.
Synopsis- Sugarcane (Control) Order 1966 (As amended on 9-9-19830
The important provisions contained in this Order are summarised below:-
Criteria for determination of SMP
Clause 3(1) & 3(2) deal with fixation of the Statutory Minimum Price having regard to five criteria, viz. -
(i) cost of production of sugarcane;
(ii) return to grower from alternative crops and the general trend of prices of agricultural commodities;
(iii) availability of sugar to the consumer at a fair price;
(iv) the price at which sugar produced from sugarcane is sold by the producer of sugar; and
(v) the recovery of sugar from sugarcane.
Time stipulation for payment of cane price
Clause 3(3) deals with fixation of 14 days period for making payment for sugarcane delivered at factory gate or at cane collection centre.
Interest liability on delayed payments
Clause 3(3-A) provides for interest liability on payments delayed beyond 14 days of delivery of sugarcane at 15% per annum.
Unpaid/unclaimed cane price
Clause 3(7) deals with deposits to be made with the District Collector, within three months of close of a sugar year, amounts of cane price unpaid or lying unclaimed with the factory on the last day of the sugar year.
Rates of cane price
Clause 3A provides for payment of sugarcane price either at the rates of SMP notified by the Central Government or at the 'agreed price' ( i.e. the price agreed between the producer and the cane grower).
Minimum Price for khandsari
Clause 4 deals with fixations of minimum price for khandsari sugar at a rate not exceeding the SMP fixed by Central Government for cane supplies made to sugar factories in the region, and prohiits sale or purchase of cane at a price lower than that fixed for khandsari sugar producer under this clause.
Additional cane price
Clause 5-A provides for payment of additional cane price in accordance with the formula contained in the Second Schedule to the Sugarcane (Control) Order, 1966. This formula (generally referred to as 'the Bhargava Formula') is meant to anable the farmer to get a remunerative price for the cane supplied after 1-10-1974, by sharing the profits arising out of excess realisation with the producer sugar factory.
Intimation to producers/growers, regarding addl. Cane price
Clause 5-A(2) provides for intimation in writing to the producer of sugar and the cane grower connected with the supply of sugarcane regarding the additional cane price determined.
Appoeals against determination of addl. Cane price
Clause 5-A(3) deals with appeal against the additional price determination and provides for a period of 30 days from the date of communication in this regard for appeal by the aggrieved party, with power to the Government will be final.
Restriction of supply of fixed percentage of cane produced
Clause 5-A(7) deals with restriction on the cane grower to supply not less than 85% of sugarcane agreed to by him, and if subjected to any penalty for failure to supply 85% of cane, deprives him of the entitlement to additional cane price.
Reservation of cane area
Clause 6 deals with the power of Government to regulate distribution and movement of sugarcane such as fixation of 'reserved area' for a sugar factory, grower, directing the cane supplier and sugar factory to enter into an agreement, prohibiting or restricting the export of sugarcane from any area without a permit etc.
Licensing of khandsari units
Clause 7 deals with power to license power crushers, khandsari units and crushers to regulate purchase of sugarcane.
Delegation of powers
Clause 11 deals with the delegation of powers to any authority of the Central/State Government.

LEVY SUGAR SUPPLY(CONTROL) ORDER 1979

State legislations relating to enforcement of payment of cane price
There are various State legislations regarding enforcement of payment of sugarcane price to growers in Uttar Pradesh, the U.P. cane (Regulation of supply and Purchase) Act, 1953, contains provisions for tagging a percentage of advances given by banks of payment of cane price, together with interest thereon, by the Collector, on the basis of recovery certificate issued by the Cane Commissioner, as if it were an arrear of land revenue. Similar provisions also exist in State legislations of Madhya Pradesh, Andhra Pradesh, Bihar and tamil Nadu contain provisions for penalties for contravention which include fines and imprisonment.
Levy Sugar Supply (Control) Order, 1979, provides for powers to issue direction to producer or dealer for supply of levy sugar requisitioned by the Central Government through an order made with reference to Section 3(2) (f) of the E.C. Act, 1955.
Month-to-month release orders for delivery of levy sugar are issued in exercise of the powers conferred by this order.

SUGAR (PACKING AND MARKING)ORDER, 1970

Sugar (Packing and Marking) Order, 1970 provides markings to be indicated on sugar bags. Unless otherwise permitted by Central Government, sugar is required to be packed in A-twill jute bags conforming to Indian Standard Specifications Sugar meant for the purpose of export and small consumed packs of 5 kg and below, have been exempted from the compulsory use of jute bags.
Sugar Price Determination orders
Many sugar mills resort to legal remedy against fixation of sugar price by the Central Government on different aspect. Significantly, the principle price of price determination on zonal basis which was challenged, was upheld by the Supreme Court. The Court observed that, apart from the impracticability of fixing prices unitwise in the whole country, the entire object and purpose of controlling would be defeated by the adoption of such a system. Unitwise fixation and payment on that basis would mean perpetauting inefficiency and mis-management and depriving partial control policy of the incentives for economy and efficiency inherent in it.
Sugar Export promotion Act
The Sugar Export Promotion Act, which casts an obligation on all sugar mills in the country to export, has been repealed by an Ordinance which, however, has not been subsequently converted into an Act within the stipulated time. With the de-canalisation of exports, it is no longer mandatory for all manufacturers of sugar to export. Export can be made voluntarily. But, resorting to export of sugar, would not exempt any sugar mill either from its obligation to supply levy sugar which is requisitioned by the Government in terms of Section 3(2) (f) of the EC Act, 1955, or to effect sale of sugar in open market in compliance of the month to month release orders issued by the Government.

SUGAR CESS ACT, 1982

The Sugar Cess Act 1982 was enacted to provide for the imposition of a cess on sugar for the development of sugar industry and for matters connected therewith. The Act empowers the Central Government to levy the cess, by way of a duty of exercise, on sugar which will help to generate funds for supplementing financial assistance for rehabilitation and modernisation or sugar factories and for development of sugarcane and research activities connected therewith. The Sugar Cess Rules, 1982 (which were made under the Act) provide for the manner of accounting reports and returns to be furnished by sugar factories, maintenance of accounts etc. An amount equivalent to the proceeds of the duty of excise levied and collected under the Act, reduced by the Cost of collection as determined by the Central Governments, shall be credited to the Sugar Development Fund formed under Section 3 of the Sugar Development Act, 1982.
SUGAR CESS ACT 1982

SUGAR DEVELOPMENT FUND ACT, 1982

The object of the Sugar Development Fund, 1982 (briefly the SDF Act) in the formation of the Sugar Development Fund to be applied for the purpose of rendering financial assistance through loans at concessional rates for rehabilitation and modernisation of sugar factories as well as for sugarcane development and for encouraging research aimed at development of sugar industry by making grant. The Fund shall also be applied for defraying expenditure for the purpose of building up and maintenance of buffer stock of sugar with a view to stabilising price of sugar.
SUGAR DEVELOPMENT FUND ACT 1982

SUGAR DEVELOPMENT FUND RULES, 1983

The Sugar Development Fund Rules, 1983 were made in exercise of the powers conferred by Section 9 of the SDF Act, 1982, to provide for (a) the manner in which any loss or grants out of the Fund and the terms and conditions thereof, (b) the manner and form in which applications are to be made; (C) the composition of the committee and the procedure to be followed by it in the discharge of its functions and (d) the form in which and the period within which statistical and other information may be furnished by sugar factories.
From 1st November, 1982 the amount of cess payable by sugar factories is Rs. 14/- per quintal of sugar.
SUGAR DEVELOPMENT FUND RULES 1983

LSPEF ACT 1976

Levy Sugar Price Equalisation Fund Act, 1976 (Amended upto 1984)
The Levy Sugar Price Equalisation Fund Act 1976 (briefly LSPEF Act) was enacted to provide for the establishment, in the public interest, of a Fund to ensure that the price of levy sugar may be uniform throughout India and for matters connected therewith or incidental thereto.
The LSPEF Act provides for establishment of a fund called the Levy Sugar Price Equalisation Fund (briefly LSPEF) into which shall be created (a) the amounts representing all excess realisations made by the producers either before or after the commencement of the Act, and (b) the amounts of loans advanced or grants made, if any, by the Central Government for carrying out the objects of the Fund. The Fund shall be administered by the Central Government (Section 3). Moneys remaining unclaimed for a period of six months from the date on which they are credited shall vest in the Central Government and shall be utilised, having regard to the interests of consumers of levy sugar as a class and the need to ensure that the retail issue price of levy sugar in uniform throughout the Country (Section 8). The LSPEF Act also empowers the Central Government to recover excess realisations made by sugar factories as ' Arrears of Land Revenue' (Section 11) Penal provisions, prescribing imprisonment or fine or both, in respect of defaulting sugar mills in the matter of crediting excess realisations are also contained in the Act (Section 13). Section 16 of the Act provides for power to make rules. In exercise of such power, the Levy Sugar Price Equalisation Fund Rules, 1977 were made, to provide for the manner of (I) crediting moneys to the Fund (ii) accounting and transactions of the Fund (iii) inviting applications from buyers for refund, (iv) utilisation of the Fund by the Central Government, etc. besides prescription of forms for various purposes in terms of the LSPEF Act.
The Act was amended in 1984 to provide for certain modifications in the principal Act, with a view to obviating litigations on the subject in the light of the experience gained during the administrations of the LSPEF Act, 1976.
There has been no challenge in courts of law after the amendment of 1984.