The government has agreed in principle to fully deregulate the sugar sector after consultations with farmer groups and sugar mill representatives, marking a major policy shift and aligning with broader structural reforms.

Under the proposed framework, the sugar industry will transition to a market-driven system, ending decades of state involvement in production, pricing, trade and procurement. The move comes after similar deregulation steps were taken in the wheat sector, with sugar positioned as the next commodity to shift away from administrative controls.

The plan envisions removal of government oversight across the supply chain, with pricing, cultivation, procurement, trade and capacity decisions handed over to market forces.

As part of the deregulation:

• Farmers will be free to grow any sugarcane variety and choose planting regions without zoning restrictions.
• Sugarcane procurement will not be regulated, allowing farmers to sell to any mill, or divert crop towards jaggery production.
• The minimum support price mechanism will be abolished, and cane prices will instead reflect demand and supply conditions.
• Export quotas and subsidies will be discontinued, and the long-standing restrictions on sugar trade will be lifted, enabling open imports and exports.
• The ban on establishing new sugar mills will be removed.
• Idle mills may import raw material for processing if they remain closed for prolonged periods.
• Mills will also have the option to import raw sugar for refining and re-export, a measure aimed at boosting capacity utilisation and enhancing foreign sales.

While the government plans to withdraw from direct interference in the sector, some protective measures for farmers are included. A seasonal list of prohibited cane varieties will be issued to discourage cultivation of low-yield or unsuitable crops, ensuring that farmers are not adversely affected by complete liberalisation.

Officials familiar with the development say the reform package is designed to lower fiscal pressures, promote competition and increase efficiency, while also aligning agricultural markets with structural adjustment requirements linked to macroeconomic reforms.

If implemented, the changes are expected to reshape the country’s sugar economy, affecting farmers, mills, traders and consumers. The shift toward competitive pricing and open trade could make the sector more responsive to global markets and reduce the budgetary burden of traditional support mechanisms.