Business Day

02 October 2026

The gazette notice issued by the foreign trade directorate of the Indian Ministry of Commerce made for very terse reading. One page, straight to the point.

‘The import policy for raw sugar is amended to allow 10 Lakh (‘one million’) MT’, read the statement signed by Lav Agarwal.

The first time in nearly a decade that the world’s most populous nation has imported sugar.  Sugar prices in India (the world’s second largest producer) rose by 40% between June and August, as lower supplies (due to lower monsoon rainfall in two of its main sugar-cane producing areas) spiked prices of the sweet stuff. So too might the buoyant fuel prices incentivize greater diversion to bio-ethanol. However, most of Indian sugar, aside from the less than a tenth that is exported, is used locally for consumption. With a low share diverted for ethanol. The share of sugar diverted for ethanol in India has declined from around 12% in 2022 to around 9% in last year’s season. With grains playing a larger role in ethanol production, according to a recent statement by the Indian government.  In response to this supply crunch, the Indian authorities (fearing the dampener this would be on the treats-filled Festive Season), allowed for the duty-free import of a million tons of sugar to ‘stabilise’ prices. By quota.

Since 1947, global trade rules have looked unfavourably on quotas and viewed these as an acceptable ‘exception’; albeit severely circumscribed. With the rules requiring that the nation issuing the quota, allocate volumes to nations with a ‘substantial interest in supplying the product’. With some regard for the share of total imports taken up by any different nations. However, much about how such quotas function reveals some interesting uses for these instruments

Firstly, quotas have been used as in the case of India described above, for ‘price management’ in a manner different to what the post war negotiators may have envisaged. To ‘discipline’ price formation by ‘temporary’ change to the ‘protective’ function of tariffs under particular guardrails. Using a mechanism to allow an ‘’inlet’ of imports to cool price behaviour. A ‘valve’ if you will. Which comes handy in politically sensitive products, like sugar. And a ‘temporary’ or time-bound one at that, as the measure expires for refiners at the end of this month, unless further extended.

Secondly, we have also seen quotas used to break bilateral impasse or navigate geopolitical tensions in ‘sensitive’ product markets.  This can be seen in the preferential trade agreement SADC has with the European Union. Where products like wheat, cheese , butter, pork and ice cream  from the EU are subject to duty-free import subject to volume quotas; and in the case of South African exports to Europe, similar quota apply to wine, sugar, ethanol, fruit juices and all manner of other products. A decade ago, South Africa negotiated a duty quota on American poultry, in volumes exempt from paying anti-dumping duties.

Thirdly, the ‘utilisation’ (how much of the quota is filled?) becomes a crucial consideration. Recently, the quota enjoyed by Australian and Brazilian red meat producers for entry into the world’s largest beef importer China, has come under the spotlight. Brazil (1.1 million tons) and Australia (205 000 tons) have ‘maxed out’ their share of the quota. China itself produced more beef locally than anticipated it seems, while domestic consumption (and substitutability for pork) has declined, created the inverse of the Indian sugar problem. Thus raising ‘diversion’ (where imports otherwise destined for China may head to other markets) risks, which may acceptably lower beef prices for consumers at a fridge level; but ‘complicate’ planning and production cycles for red meat industries still reeling from a disease outbreak.

The same instrument across similar industries, in two very large, vastly different and populous neighbouring countries, operates in seemingly different ways. Underscoring the crucial inter-dependencies in food and energy systems in an uneasily balanced, and increasingly hostile world. A world where old tools like tariff rate quotas reset the terms of ‘preference’ for those nations seeking out new friends and old foes alike.

Cawe is chief commissioner at the International Trade Administration Commission. He writes in his personal capacity.