Sugar is a commodity covered under the Essential Commodities (EC) Act, 1955 and is subject to various controls in terms of the provisions of the said Act and the Rules made there under. The objective of the EC Act is to control the production, supply, distribution of and trade and commerce in the essential commodity.

The definition of "sugar" occurring in sub-section (e) of Section 2 of the Act, inter alia, sugar or any sugar in crystalline or powdered form". However, all the controls, which are applicable to sugar produced through vacuum pan process by sugar mills, are not enforced in entirety on khandsari sugar at present.

Section 6 of the Act provides for seizure/confiscation of the commodity by the District Collector. Section 7 deals with penalties for contravention of the provisions of any order made under Section 3 and Section 7A deals with the power to recover certain amounts as arrears of land revenue. Section 10 makes every offence punishable under the Act as cognizable and non-bailable.

Taking into consideration the unabated price rise during the years 1979 and 1980, certain special provisions were made for a temporary period of five years for dealing more effectively with persons indulging in anti-social activities like hoarding and black marketing and the evil of vicious inflationary prices.

Section 3 (3C) of the EC Act makes specific provision with regard to the payment to be made for sugar sold by the producer in compliance of an order made under Section 3(2) (f) of the Act by the Central Government for supply of levy sugar. This Section lays down the guidelines for determination of price payable to the producer for levy sugar supplied by him. Under this sub-section, levy sugar price is required to be fixed by the Central Government having regard to –

1. the minimum price fixed for sugarcane by the Central Government;
2. the manufacturing cost of sugar;
3. the duty or tax payable thereon; and
4. the securing of a reasonable return on the capital employed in the business of manufacturing sugar

It is also provided that different prices may be determined from time to time for different areas or factories or for different kinds of sugar.

Section 3 of the Act confers wide powers on the Central Government to make orders to provide for achieving the primary objective of exercising effective control to check inflationary trend in prices and to ensure equitable distribution of the essential commodity.