Government caps sugar stockholding, allows duty-free imports to curb price surge

Sugar is classified as an essential commodity under the Essential Commodities Act, 1955 (ECA), giving the Union government broad authority to regulate production, supply, distribution, and trade under Section 3 of the Act. India is simultaneously the world's largest consumer and one of the largest producers of sugar, with cultivation concentrated in Uttar Pradesh, Maharashtra, and Karnataka. The sector is governed by layered price instruments: the Fair and Remunerative Price (FRP), set annually by the Cabinet Committee on Economic Affairs (CCEA), is the minimum mills must pay farmers, while the Minimum Selling Price (MSP) for sugar is the floor below which mills cannot sell in the open market. States may additionally declare a State Advised Price (SAP), typically higher than the FRP.

India's standard import duty on sugar stands at 100 per cent, making commercial imports unviable under normal conditions. When domestic prices spike, the government deploys a Tariff Rate Quota (TRQ) mechanism — allowing a fixed volume of imports at zero or reduced duty without fully liberalising the market. The sugar season runs from October 1 to September 30, and opening stocks at the start of each season are a critical price-stability indicator. When stocks fall below domestic requirements, prices tend to surge, particularly during the festive season from August to November when demand for sugar-intensive products peaks sharply.

Sugar also sits at the intersection of food and energy policy through the Ethanol Blended Petrol (EBP) Programme, which permits mills to divert sugarcane juice or molasses to produce ethanol for petrol blending. This creates a structural tension: when ethanol prices are attractive, mills may prefer diversion over sugar production, tightening domestic supply. Recognising this risk, the government has progressively shifted the programme toward grain-based feedstocks such as maize.