India, one of the world's biggest sugar producers, is turning to imports amid tightening supplies, weather risks and rising festive demand.
Nearly a decade after the last such move, the government has allowed duty-free imports of 1 million tonnes of raw sugar until October 31 to boost domestic availability and contain prices.
The move hit sugar stocks on Friday after a sharp rally in the previous two sessions, with Balrampur Chini Mills surging 18%, Dwarikesh Sugar Industries nearly 14% and several others gaining 7-10%. So, why are sugar prices rising, and what is the Opposition's allegation over ethanol?
Prices surge as festive demand returns
Domestic sugar prices have risen sharply over the past two months. Ex-mill prices are around Rs 5,400-5,560 per quintal, with S-grade at Rs 5,750 and M-grade at Rs 5,850-5,900, excluding GST. The all-India average ex-mill price stood at Rs 5,400-5,500 per quintal on Tuesday, up from Rs 3,900 a year earlier.
Retail sugar prices rose 13% year-on-year to Rs 52.30 per kg on August 18, from Rs 46.34 a year earlier. Demand typically rises between August and November with Ganesh Chaturthi, Dussehra and Diwali.
Atul Chaturvedi of Shree Renuka Sugars said India remains a key swing factor for global sugar prices, with production pressures in Europe and Thailand pointing to a 2.5 million tonne global deficit. He said lower Indian stocks and subdued FY26 production are adding to price pressure.
Why the Centre imposed stock limits
Alongside imports, the government has capped sugar stocks held by bulk consumers using more than 10 tonnes a month at 15 days' consumption. The measure takes effect from September 1 and remains in force until November 30.
Applications for the 1 million tonnes of raw sugar imports are open from August 21 to August 28, with preference for importers undertaking to complete imports by October 15.
Industry estimates put opening stocks for the 2026-27 season at 4-4.2 million tonnes, while some researchers estimate 3.2-3.5 million tonnes, both below domestic requirements of around 5 million tonnes.
From bumper crop expectations to imports
The import decision marks a sharp reversal from the government's approach earlier in the 2025-26 season. In November 2025, the Centre approved 1.5 million tonnes of sugar exports, later raising the limit to 2 million tonnes, amid expectations of a bumper crop. Only around 800,000 tonnes were eventually shipped before exports were curbed as domestic stocks tightened.
ISMA had initially estimated 2025-26 production at 34.90 million tonnes. AISTA later cut its net output forecast by 4.4% to 28.3 million tonnes. An industry executive said actual production was below 28 million tonnes, with around 3 million tonnes of sucrose diverted towards ethanol and other uses.
Former Agriculture Secretary Siraj Hussain told The Economic Times that the divergence between production estimates raises questions over the reliability of forecasting.
Monsoon and El Niño add to supply concerns
Below-normal rainfall in Maharashtra, India's leading sugar-producing state, had raised concerns over standing cane, with ex-mill prices rising from Rs 38.5 per kg in early June to Rs 41.5 per kg by early July. In Uttar Pradesh's Balrampur, heavy rain and strong winds have prompted farmers to tie cane plants to prevent them from falling.
Recent rainfall has eased immediate concerns, but earlier moisture stress may not be fully reversible. Rainfall over the next two months will be crucial for cane yields. El Niño risks in Asia and above-average rains disrupting Brazil's sugarcane processing are adding to global supply concerns.
Opposition blames ethanol policy
AAP National Convenor Arvind Kejriwal alleged that the Centre's policy of diverting sugarcane towards ethanol production contributed to the rise in sugar prices. He claimed prices had increased by around Rs 20 per kg in 17 days.
"Sugar that was Rs 46 per kilogram 17 days ago is now Rs 65 per kilogram," Kejriwal claimed, arguing that diverting sugarcane for ethanol had reduced sugar availability.
Congress leader Randeep Surjewala also alleged that the ethanol policy had reduced the availability of sugar and other food commodities. He claimed 2.5 million tonnes of sugarcane had been diverted towards ethanol production and linked the policy to higher sugar, corn, rice and animal-feed prices.
Surjewala also questioned the shift from India being a sugar exporter to allowing 1 million tonnes of raw sugar imports, challenging the rationale behind the ethanol policy.