More Stories

Informist, Wednesday, Aug. 19, 2026

By Afra Abubacker 

NEW DELHI – With several major festivals lined up until November, market participants say India must waive import duty on sugar to stabilise prices that have rallied to record highs on supply worries even before the peak demand season. Though shipments of raw sugar from Brazil, the world's largest producer, will take 40-50 days to reach Indian ports, experts say duty-free imports will kill the inflationary expectations in sugar prices and nudge mills to release stocks actively. Some, however, doubt if the government will encourage imports for fear of a public backlash over having created the problem by diverting sugar to produce ethanol for blending with petrol.

Tuesday, several media organisations reported that New Delhi is mulling a reduction in the import duty on sugar to improve domestic supplies. Sugar benchmarks on the Intercontinental Exchange rose to a one-year high but domestic rates did not fall. In fact, they surged by INR 200-INR 500 per 100 kg in key sugar-producing states such as Maharashtra, Karnataka, Uttar Pradesh, and Tamil Nadu. Ex-mill prices ranged between INR 5,000 and INR 5,600 per 100 kg in key markets Tuesday, rising further to INR 5,250-INR 5,850 per 100 kg Wednesday.

"Until and unless things (nil-duty imports) are on paper, sugar prices will rise sharply," an official from the National Federation of Cooperative Sugar Factories said. "Even if imports are allowed, prices may only stabilise temporarily." The official added that media reports of the government allowing duty-free imports only confirm the market's fear that supplies are shrinking and prompt mills to raise prices further.

In 2018, the government raised the import duty on sugar to 100% from 50% to support the domestic industry and sugarcane farmers. The import duty on sugar was raised from 15% to 25% in 2014, 40% in 2015, and 50% in 2017.

Over the past several weeks, sugar prices have risen sharply whenever the government has intervened in the market to ease them. Friday, the government mandated that mills must despatch stocks within seven days of billing to prevent the creation of an artificial scarcity. In the first two weeks of this month, the government also undertook physical inspections of sugar mills across the country to verify their reported stocks and sales data. In July, it imposed a stockholding limit on traders for four months starting August. 

According to experts, these actions of the government convey the message that sugar supply is tightening and the stock pipeline is running dry. However, they clarified that the Indian market is not short of sugar, and stocks will last until October. "It's not like we are going to have zero stocks, but tightness will be felt because you cannot reach the very last bag," Rahil Shaikh, founder & managing director, MEIR Commodities, explained.

While most experts agree stocks are tight, some say the recent rally is driven largely by speculation. Sugar prices began rallying in mid-June, which is typically an off-season for the market due to the onset of the southwest monsoon. Sugar demand typically drops during the rainy season due to the increased preference for fried foods over cold drinks and ice cream.

The deficient rains during June and July amid El Nino conditions have added a weather premium to prices. The India Meteorological Department has forecast El Nino to strengthen in August and September, a crucial growth window for the sugarcane crop. While crops in Uttar Pradesh are largely irrigated, Maharashtra's sugarcane crops are mostly rainfed, giving rise to concern about next year's production.

The rally in August has been sharper, with prices jumping INR 100-INR 200 per 100 kg on some days, particularly in the northern markets. Mills have been steadily quoting higher rates and releasing sugar in small batches from mid-August amid strong festival-season demand, traders said. August marks the start of the festival season with Raksha Bandhan, Onam, Id-e-Milad-un-Nabi, and Janmashtami, and bulk buyers such as confectioners and soft-drink manufacturers increase their sugar purchases to cater to this demand.

In addition, the sales quota for August fell short of market expectations. The government mandated mills to sell 2.25 million tonnes in the month when the market had expected a sales quota of 2.30-2.40 million tonnes as bulk buyers stock up on the commodity ahead of festivals. A higher sales quota would have put mills under pressure to liquidate their stocks, improving market supplies.

Experts point out that demand for sugar is not price-elastic. "By reducing sugar and putting in other sweeteners, how do you add weight (cheaply)? Because people buy sweets by weight and sugar adds weight," G.K. Sood, agricultural markets and policy expert, said. Moreover, substitutes such as milk solids, fruit extracts, and stevia are costlier. Sugar is an essential ingredient in soft drinks and ice creams as well.

If imports are not allowed, traders see sugar prices rising steadily to INR 5,500-INR 6,500 in key markets. Asked if imports would be viable, they point out that global raw sugar prices are on a par with prices in many domestic markets, particularly in Maharashtra. Even imported white or refined sugar has price parity in markets such as Kolkata, where prices are higher than in other domestic markets. "There is parity in Kolkata markets, other markets will also catch up," Sood said.

Tuesday, London white sugar prices on the Intercontinental Exchange were around $540.3 per tonne, and US raw sugar prices were around 17.38 cents per pound. The free-on-board price of Brazilian raw sugar would be around INR 4,250 per 100 kg at Mundra port, with an additional cost of INR 5.5 per kg for handling and refining, taking ex-refinery sugar prices above INR 4,800 per 100 kg, commodity trader Shashikant Pandhare said.

Experts say the government will have to allow duty-free imports of raw as well as white sugar to curb the price rise. Imported raw sugar will only enter domestic supplies slowly, as it has to first reach Indian ports, then be refined and transported to key markets across the country, Sood said, adding that imports will only be meaningful if the duty is waived.

"As a trader, I feel there is a need for imports," Pandhare said, "but mills may feel otherwise." Some market participants also believe the government may hesitate to allow duty-free imports because of the poor optics. The government has been promoting the diversion of sugar or sucrose for ethanol production. About 3.0 million tonnes of sugar is estimated to have been diverted for ethanol production this year. 

"At the end of the day, allowing sugar imports will not look good," an industry official said. "They have been promoting ethanol to save forex (foreign exchange), and now importing sugar at higher costs will not look good." If at all imports are considered, the official said India will have to import about 1.0 million tonnes to keep the market adequately supplied.  End

US$1 = INR 95.75

Edited by Rajeev Pai

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2026. All rights reserved.