From sugar exports to imports: What’s behind India’s policy U-turn?
India permitted sugar exports of up to 1.5 million tonnes in November 2025 for the 2025-26 season (October-September), later reallocating quotas among mills to take total authorised exports to about 1.59 million tonnes.
Around 0.8 million tonnes had already been shipped out before exports were halted by May 2026 as the production outlook weakened.
By August 2026, the government was considering duty-free imports of up to one million tonnes of sugar to ease domestic supply and cool wholesale prices ahead of the festival season.
Sugar prices in key markets such as Kolhapur rose sharply (reported around ₹5,350 a quintal), prompting stock-holding limits on dealers and bulk consumers.
The reversal has raised questions about whether the production and opening-stock estimates used to justify export permissions in late 2025 were too optimistic.
Sugar Sector Regulation — Essential Commodities Act and the Sugarcane (Control) Order, 1966
Sugar and sugarcane are regulated as "essential commodities" under the Essential Commodities Act (ECA), 1955, which empowers the central government to control production, supply, distribution, and trade (including stock limits and export/import restrictions) of designated commodities in the public interest. The Sugarcane (Control) Order, 1966, issued under the ECA, governs cane pricing and payment terms between mills and farmers.
Key Details
- ECA, 1955 allows the Centre to impose stock limits, licensing requirements, and movement restrictions on essential commodities during shortages or price spikes.
- The Sugarcane (Control) Order, 1966 mandates that mills pay farmers within 14 days of cane delivery.
- Export and import decisions for sugar (quotas, duties, prohibitions) are typically taken through notifications under the Foreign Trade (Development and Regulation) Act, 1992, informed by Ministry of Consumer Affairs, Food and Public Distribution assessments and cleared by the Cabinet Committee on Economic Affairs (CCEA).
The swing from permitting 1.5-1.59 million tonnes of exports to considering duty-free imports within the same season illustrates how the ECA/FTDR framework is used reactively to manage domestic price stability once production estimates are revised downward.
Fair and Remunerative Price (FRP) — CACP and CCEA Roles
The FRP is the guaranteed minimum price mills must pay farmers for sugarcane, replacing the earlier Statutory Minimum Price (SMP) system from the 2009-10 season. It is a distinct instrument from MSP (used for foodgrains), reflecting sugarcane's unique cane-to-mill supply chain.
Key Details
- FRP is determined under the Sugarcane (Control) Order, 1966, based on recommendations of the Commission for Agricultural Costs and Prices (CACP), an advisory (non-binding) body.
- FRP is formally approved by the Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister.
- FRP for 2025-26 was set at ₹355 per quintal (linked to a base recovery rate), reported to rise to ₹365 per quintal for the following season.
- As of April 2026, mills had reportedly paid about ₹99,961 crore of roughly ₹1,12,740 crore owed to cane farmers, leaving over ₹12,000 crore in arrears — a recurring issue during years of price and demand volatility.
Rising cane arrears and tight mill cash flows are part of the same stress cycle as the export-to-import reversal — when production estimates are revised down, both farmer payments and export commitments come under pressure simultaneously.
Ethanol Blending Programme and Sugar Diversion
India's Ethanol Blended Petrol (EBP) Programme diverts a share of sugarcane/sugar output toward ethanol production for blending with petrol, directly reducing the sugar available for food consumption and export.
Key Details
- The National Policy on Biofuels (2018, amended 2022) advanced the 20% ethanol-blending target; India reported achieving roughly 20% blending ahead of schedule around 2025.
- An estimated 2.4-3.1 million tonnes of sugar-equivalent was diverted to ethanol production in the 2025-26 season, according to industry estimates cited in reporting.
- The Indian Sugar and Bio-energy Manufacturers Association (ISMA) is the key industry body that tracks and revises production estimates through the season; it cut its 2025-26 net production estimate from about 30.95 million tonnes to 29.3 million tonnes in February 2026, with later assessments (including from rating agency ICRA) placing net production closer to 27.9-28 million tonnes against consumption of about 28.3-28.5 million tonnes.
Ethanol diversion is one of the structural reasons production estimates proved too optimistic — a policy designed to cut crude oil imports (energy security) directly tightened the domestic sugar balance sheet, a trade-off UPSC frequently tests under "conflicting policy objectives."
- 2025-26 export quota authorised: ~1.5 million tonnes (Nov 2025), later raised to ~1.59 million tonnes; ~0.8 million tonnes actually shipped before the halt.
- Proposed import volume under consideration: up to 1 million tonnes, duty-free.
- ISMA's revised net production estimate (Feb 2026): 29.3 million tonnes (down from 30.95 million tonnes); later estimates ranged 27.9-28 million tonnes.
- Estimated 2025-26 consumption: ~28.3-28.5 million tonnes.
- Projected opening stock (October 1, 2026): ~3.5 million tonnes, versus 5.3 million tonnes a year earlier.
- FRP for sugarcane, 2025-26 season: ₹355/quintal (reported to rise to ₹365/quintal next season).
- Cane arrears to farmers (as of April 2026): over ₹12,000 crore unpaid out of ₹1,12,740 crore due.