The Indian government on Thursday allowed duty-free imports of up to 10 lakh tonnes of raw sugar in a major intervention aimed at easing record-high domestic prices and improving supplies ahead of the peak festival season.
The decision comes as sugar prices in the domestic market have surged by nearly 40% over the past two months, increasing the burden on consumers. India, the world's largest consumer of sugar, is set to import the sweetener for the first time in nearly a decade as tightening supplies and rising prices force the government to intervene.
According to a notification issued by the Directorate General of Foreign Trade (DGFT), up to 10 lakh metric tonnes of raw sugar can be imported duty-free under a Tariff Rate Quota (TRQ) until October 31, 2026. The imports will be subject to conditions specified by the government.
The DGFT will separately specify the procedure for administering the TRQ and the one-time conversion from the Advance Authorisation Scheme to the TRQ scheme.
Limited Immediate Relief Expected
The decision may not translate into immediate and substantial relief for consumers, as the cost of imported sugar will depend on global prices, freight, insurance and refining expenses.
Raw sugar futures in New York were priced at 16.87 cents per pound on August 18, equivalent to around Rs. 3,700 per quintal on an FOB basis. Shipping and insurance costs will be added to this price.
Following reports that India was preparing to allow sugar imports, global prices rose sharply. On August 20, raw sugar prices climbed by around 3.5% to 18 cents per pound.
Industry sources estimate that, at prevailing international prices, the cost of refined sugar produced from imported raw sugar could be around Rs. 52-53 per kg. However, the final landed and refined cost will depend on international prices at the time Indian importers conclude their purchase contracts.
Refinery-Equipped Sugar Mills May Benefit
The imports are likely to benefit companies with sugar refineries located near ports, allowing them to process imported raw sugar more efficiently.
Shree Renuka Sugars, for instance, has two sugar refineries in Gujarat. Several other sugar mills also have facilities capable of refining imported raw sugar.
If mills begin their crushing operations early, they may be able to refine imported raw sugar alongside processing freshly crushed domestic cane, helping increase the availability of refined white sugar in the market.
Government Seeks to Boost Supplies
Sugar consumption typically rises between August and November due to the festival season, when demand increases from households, sweet makers, food processors and other industries.
By allowing raw sugar imports, the government is seeking to increase supplies before the new crushing season begins and prevent further escalation in prices. Industry sources believe imported raw sugar could help mills increase the production of refined white sugar during the high-demand period.
The government has also tightened stock limits for large consumers. Buyers using more than 10 tonnes of sugar per month will be allowed to maintain stocks equivalent to only 15 days of consumption from September 1 to November 30, 2026.
The measure is aimed at discouraging excessive stocking and reducing the risk of artificial shortages during the festival season.
Why Are Sugar Prices Rising?
India's sugar production has remained below domestic consumption for the past two years. In the current crushing season, sugar production is estimated at around 280 lakh tonnes, while domestic consumption is about 285 lakh tonnes.
Based on expectations of better production, the government had initially allowed exports of up to 20 lakh tonnes of sugar. However, exports were halted in May, by which time around 800,000 tonnes had already been exported.
Lower production and tightening supplies have led to a sharp increase in domestic prices over the past month and a half. According to industry sources, ex-mill sugar prices in Karnataka crossed Rs. 6,000 per quintal on Thursday.
The all-India average ex-mill sugar price has also climbed to a record Rs. 5,400-5,500 per quintal, compared with around Rs. 3,900 per quintal a year earlier. Concerns over a lower opening stock for the 2026-27 sugar season, beginning October 1, have further added to the upward pressure on prices.
Retail prices have risen in line with the increase in ex-mill rates, with consumers in several markets paying around Rs. 62-65 per kg.
Supply concerns, rising festival demand and limited availability before the start of the new crushing season have all contributed to the price rally. Weather-related uncertainties and concerns over sugarcane availability have also added to market worries.