The sugar industry is a major agro-based industry of Uttar Pradesh where cropping pattern is largely subsistence-oriented and sugarcane is one of the important cash crops. During 2001-02, the state had 20.35 lakh ha area under sugarcane out of the total 44.03 lakh ha area under sugarcane in the country. The sugar industry has shown considerable instability in the level of production as a result of inter-dependence and inter-relationship between sugarcane, gur, khandsari and white sugar, leading to fluctuations in the production of sugarcane as well as sugar. These fluctuations emanate from the presence of various processing sectors and the differential governmental policies. Such an uncertain state of affairs is neither conducive to sound growth of the industry nor the growers. In view of this scenario, it was felt necessary to carry out an investigation, which can reveal the present status of sugar industry in terms of its efficiency in operations. The study has revealed that most of the mills were in the efficiency range of 60-80 per cent. Efficiency was higher in the private sector (81%), followed by the public (73%) and co-operative (66%) sectors. Though this study has advocated the continuation of partial decontrol policy, it has urged the policymakers to streamline strategies that promote stabilization of sugarcane economy and make the state a credible supplier of sugar in the international market, benefiting growers, processors and, in turn, consumers.