Why India Must Recalibrate the Sugarcane Fair and Remunerative Prices (FRP) for a US$300 Billion Bioeconomy
Authors
The Department of Food and Public Distribution recently released the draft Sugarcane (Control) Order, 2026, revamping the six-decade-old Sugarcane (Control) Order of 1966.1 This is a timely acknowledgement of Sugarcane’s expanding role from a food crop to a critical feedstock for industries such as bioplastics, Sustainable Aviation Fuel (SAF), and fuel ethanol. The proposed amendments fit these biorefineries into the regulatory framework designed for conventional sugarcane mills at a time India aspires to build a US$ 300 billion bioeconomy. This means high-value manufacturing firms that use sugarcane as their feedstock also need to pay the determined Fair and Remunerative Price (FRP). This creates a structural asymmetry for these firms, wherein the input costs are fixed by the government, while the output prices are market-determined. While the FRP has been a useful tool to protect farmers’ interests, India’s bioeconomy growth may require its graduated reform to unlock its full potential.
Agricultural price controls were introduced in the 1960s when India was facing food deficit issues. The original Sugarcane Order of 1966 was a risk insurance tool to shield vulnerable farmers from post-harvest price crashes. However, the baseline reality has changed from India facing scarcity to sugar gluts. More importantly, sugarcane has now moved from just an agricultural commodity to a key industrial biomass. While some industries, such as bio-ethanol, are at high technology readiness levels and receive government support through blending mandates, other industries, such as bioplastics, are still emerging. The clubbing of all these end-uses of sugarcane under one basket raises three important issues.
First, by pulling advanced bioproducts under the legacy umbrella, the government keeps input prices completely rigid and centrally mandated under FRP (currently Rs 365 per quintal). Meanwhile, the output prices of the finished products are determined by volatile global commodity markets. For instance, to make Indian SAF globally competitive, it needs to be competitively priced against fossil fuels. This can be difficult if negotiations on the input cost itself cannot be made.
Second, by increasing the minimum factory distances between sugar processing infrastructure to 25 km from 15 km, the amendments seek to limit processing capacity in India at a time when the bioeconomy is actively trying to grow. While such a measure may be intended to limit sugarcane cultivation because of the crop’s high water requirements, the better solution may lie in improving the sustainability of supply. This could include research into genetically engineered sugarcane varieties that require less water, offer higher yields, or improve biomass productivity, rather than restricting processing capacity.
Third, uniform pricing for all sugarcane varieties disincentivises the farmers to cultivate specialised, non-food industrial crop strains that could be optimal for specific industrial applications. For example, efficient ethanol and SAF processing requires sugarcane varieties specifically bred with higher cellulose and lower lignin content to streamline enzymatic breakdown.
It is therefore critical that policy manages both farmer welfare while incentivising emerging bioeconomy industries. This decision-making starts with decoupling the bio-economy from agricultural welfare policies formed for an era defined by food shortages. India can consider a phased removal of the FRP in this sector. In a phased manner, FRP can be removed for industries investing in R&D for biomanufacturing immediately, and at a later stage, FRP can be removed for refineries directing more than 50 per cent of their incoming sucrose or biomass into non-food applications (SAF, bioplastics, platform chemicals) till such industries take hold. In parallel, responsible sugarcane production and R&D in these sectors should be incentivised. This can isolate capital-intensive investments from rigid agricultural price controls and allow them to thrive while preserving the FRP for traditional sugar production and baseline fuel ethanol for the time being. The exemption must be accompanied by the removal of spatial monopolies. Without greater market competition, freeing prices could simply transfer bargaining power from farmers to sugar mills, rather than creating a genuinely competitive market. The FRP policy for conventional sugar mills based on metrics such as market concentration, farmer income data, and processing efficiency in five years could be re-examined in 5 years and amended, if required.
The decoupling of the bioeconomy from FRP will enable biorefineries to invest in high-efficiency yeast strains or enzymatic processes, which accelerate deep-tech capital expenditure in rural India. At the same time, farmers would receive genuine price signals, incentivising the cultivation of higher-value industrial cane varieties, raising per-hectare returns over time. Overall, this helps India’s bioeconomy sector to compete internationally on input-cost terms, moving sugarcane policy from an agricultural welfare instrument to an industrial development enabler.
Footnotes
Department of Food and Public Distribution, [Draft Sugarcane (Control) Order, 2026] (https://dfpd.gov.in/WriteReadData/Notices/0c0889b0-7aeb-41a1-8735-9b0b7c6256c6_OM%20reg.%20-%20Review%20of%20Sugarcane%20%28Control%29%20Order%201966.pdf)↩︎