Retail prices jumped nearly 40% in two months, and traders now expect mills to use only half the government's new import quota as domestic prices have already reversed.
India's government has allowed duty-free imports of up to 1 million tonnes of raw sugar through 31 October. It is the country's first sugar import quota in nearly a decade, coming after a shortfall in domestic production sent prices surging nearly 40% in two months.
Key Facts
- Down 11% from the government's earlier forecast, 2025-26 production now stands at 30.6 million tonnes.
- Retail sugar prices climbed from 40-45 rupees a kilo in June to 58-60 rupees by August.
- Mills may use only half of the quota, as domestic prices already fell 20% from their record high.
India is the world's largest sugar consumer and its second-largest producer, so an import quota this size is unusual.
The reversal, detailed by BBC News, traces back to last year's production estimates. The government approved exports of 1.5 million tonnes at the start of the season, then added another 500,000 tonnes in February.
Both approvals rested on projections that output would run comfortably ahead of domestic demand. Roughly 800,000 tonnes shipped before exports were halted on 13 May, by which point the scale of the shortfall was becoming clear.
Vikram Suryavanshi, a senior analyst at PhillipCapital India, called the reversal unusual. In his view, the swing from approving exports to a million-tonne import quota marks an unusually large revision to the government's own estimates.
The government has pointed to reduced sugarcane output, citing erratic monsoon rainfall, waterlogging, and crop disease. It has also pointed to hoarding and tighter global supplies.
Why India's Sugar Production Fell Short
Sugarcane is highly water-intensive, and uneven monsoon rains and prolonged dry spells hit key growing states including Maharashtra, Uttar Pradesh, and Karnataka this season.
Yields fell, and thinner cane with lower sucrose content meant mills produced less sugar per tonne crushed. Some crops also suffered from disease. Siraj Hussain, a former secretary at India's federal agriculture ministry, attributed this year's shortfall to a mix of unusual weather and disease in certain cane varieties.
The government's own production estimate for the 2025-26 season has been revised down 11%, from 34.3 million tonnes to 30.6 million tonnes. The season runs from October 2025 to September 2026.
Some of the shortfall is attributed to cane diverted to ethanol production.
India made E20 (petrol blended with 20% ethanol) the standard fuel at pumps this year, just as sugar output was already tight. The government disputes how much this policy is to blame. It argues that the share of cane diverted to ethanol actually fell, from 12% in 2022-23 to around 9% in 2025-26.
What The Duty-Free Import Window Allows
Under the commerce ministry notice, mills and refiners could apply between 21 and 28 August for a tariff-rate quota, Reuters reported.
The quota allows up to 1 million tonnes of raw sugar into the country duty-free through 31 October.
India normally imposes a 100% duty on sugar imports.
The notice gives preference to importers who complete shipments by 15 October. It also lets port-based refineries in special economic zones sell duty-free sugar into the domestic market for three months from 1 September. These refineries normally import raw sugar only to refine and re-export it.
The imports are expected to come mainly from Brazil. Shipments typically take close to two months to arrive, so the bulk of the new supply will not reach the domestic market until October at the earliest.
But the price spike that prompted the import decision has already started to reverse. Domestic ex-mill prices fell nearly 20% from their record high in the days after the notice was announced, Reuters reported.
"Imports looked attractive last week, when prices were firm and rising," said Rahil Shaikh, managing director of Mumbai-based trader MEIR Commodities India.
Shaikh added that the import margin was thin, with no guarantee it would hold by the time shipments arrive. Shaikh and four other trading-house dealers told Reuters that imports are unlikely to exceed 500,000 tonnes, roughly half the quota. Most of that volume, they said, is expected to come from refiners rather than mills.
Mills have their own reason to hold back. Domestic supply is expected to rise once the new crushing season starts. The Indian Sugar Mills Association has asked mills to begin crushing cane a fortnight earlier than usual, from 15 October, to build stocks faster. The government has also capped stocks held by traders and wholesalers at 400 tonnes for three months, an anti-hoarding measure.
How Global Sugar Supply Is Also Tightening
India's shortfall is landing at a moment when global sugar supply is already tight.
El Niño conditions have affected rainfall in Thailand, and heavy rain has disrupted cane harvesting in Brazil, the world's largest sugar producer. Mills there are also diverting more cane to ethanol.
Heatwaves battered Europe's sugar beet crop, and France is expecting its worst harvest in four years. The US Department of Agriculture expects global sugar production to fall to 184.9 million tonnes this season, down from a record 186.1 million tonnes the year before.
London white sugar futures hit $541 a tonne in mid-August, their highest level since April 2025. New York raw sugar futures jumped 4% on the day India announced its import plan.
Atul Chaturvedi is non-executive director of Shree Renuka Sugars, India's largest sugar refiner and a major ethanol producer.
He put the year's lesson plainly: "We need to be a lot more careful in estimating our sugar crop numbers."
At current prices, mills have little financial incentive to divert cane toward ethanol. That shift, he added, could ease the supply picture heading into next season.
The Indian Sugar Mills Association reads this year's spike differently. Deepak Ballani of ISMA, which represents private mills producing nearly half of India's sugar, argues that stocks and monthly supply quotas remain comfortable. He attributes the price surge to speculation and hoarding, not a genuine shortage.
Suryavanshi disagrees. He has pointed out that prices kept climbing even after the government's stockholding curbs were announced. He takes that as a sign of a real supply squeeze rather than speculation.
