India allows duty-free sugar imports as prices climb ahead of festive season

Centre on Thursday permitted duty-free imports of 1 million metric tonnes of raw sugar under a tariff rate quota until October 31, as domestic prices continue to climb, with the move aimed at improving supplies ahead of the peak festival season.

Sugar prices have increased nearly 40% over the past two months amid tightening supplies, putting pressure on consumers and prompting the world’s biggest sugar consumer to turn to imports.

Also read: India tightens sugar stock limits to tame record prices


The decision marks India’s first sugar imports in nearly a decade, according to the government order.

The move comes as sugar demand is expected to strengthen between August and November, when festivals such as Ganesh Chaturthi, Dussehra and Diwali typically drive consumption. Bulk users, including biscuit and confectionery manufacturers, also tend to build inventories ahead of the festive period.

Centre tightens stock limits as festive demand builds

The import decision comes alongside tighter restrictions on sugar inventories held by bulk consumers. Under an order issued on Wednesday, dealers using more than 10 metric tonnes of sugar a month will be allowed to hold stocks equivalent to no more than 15 days of consumption.

The new stockholding rule will take effect from September 1 and remain in force until November 30. The Centre had last month imposed a 30-day limit on sugar stocks as it sought to improve market availability and discourage excessive inventory accumulation.

Sugar prices have nevertheless continued to rise, with prices climbing about 10% over the past month to record levels. Supplies are expected to remain under pressure for at least the next three months as festive demand gathers pace.

Uneven rainfall and dry weather conditions have also added to concerns over sugarcane availability. Sugarcane is a water-intensive crop and depends heavily on adequate rainfall and irrigation.

Also read: India weighs sugar import duty cut to curb record local prices

Import duty, monsoon deficit add to supply concerns

The latest decision follows concerns over domestic sugar availability after prices reached record levels. India had been considering a reduction or removal of the existing 100% import duty on sugar to increase supplies, according to a Bloomberg report published earlier this week.

Ex-mill sugar prices in Maharashtra had recently reached around Rs 46 a kg, the highest level on record, according to the Indian Sugar and Bio-energy Manufacturers Association. Sugar consumption in India generally peaks from late August through January as demand for traditional sweets, processed foods and beverages rises during the festive period.

Weather conditions have added another layer of uncertainty for the sugar industry. Monsoon rainfall, which is important for sugarcane cultivation, was running 13% below normal, while the deficit had been more than 40% towards the end of June, according to the India Meteorological Department.

Sugar mills in Uttar Pradesh and Maharashtra, the country's leading sugarcane-producing states, are also planning to begin crushing 10-15 days earlier than the usual early-November start following consultations with the food ministry. The earlier start is aimed at bringing additional sugar into the market as demand rises.

Sugarcane acreage stood at 5.83 million hectares as of August 14, slightly below the corresponding level last year, according to the farm ministry.

India is the world's second-largest sugar producer but does not typically rely on imports for domestic consumption. The country last imported substantial quantities of sugar in 2017-18, according to industry data.