New Delhi: India is considering a range of measures, including limited duty-free sugar imports, lower import duties and tighter stockholding limits for bulk traders, as domestic sugar prices have surged to record levels ahead of the peak festival season. The government is also examining changes to monthly sugar sales quotas for mills to improve market supplies and control prices.
According to government and industry sources cited by Reuters, the measures are being considered after an unusually sharp rise in sugar prices ahead of the festival season, when demand typically increases significantly. A government source said authorities are examining several policy options to prevent what it described as an unwarranted increase in prices.
Sugar Prices Rise Nearly 20% in August
Wholesale sugar prices in Kolhapur, Maharashtra, one of India's major sugar trading centres, have increased by nearly 20% since the beginning of August, reaching a record ₹5,350 per 100 kg, or ₹53.50 per kg.
The price surge has occurred despite government assessments that domestic sugar supplies should be sufficient to meet demand until supplies from the next sugar season begin arriving. However, traders have reported tight availability in the physical market.
Ashok Jain, president of the Bombay Sugar Merchants Association, said that local supplies are currently tight and that imports could help improve availability and moderate prices during the festival season.
Why Is India Considering Sugar Imports?
India is the world's largest sugar consumer, and demand typically rises sharply between August and November because of festivals such as Ganesh Chaturthi, Dussehra and Diwali. Higher consumption of sweets, confectionery and other sugar-based products puts additional pressure on domestic supplies during this period.
The government is therefore considering multiple measures instead of relying on a single intervention. These include allowing limited sugar imports, reducing import duties, lowering stockholding limits for bulk traders and modifying the monthly sales allocation available to sugar mills.
Lower import duties could make overseas sugar more competitive in the Indian market and allow additional supplies to enter the country if domestic availability remains tight. 
Sugar Imports Could Impact Global Prices
India has not depended on significant sugar imports for almost a decade. Therefore, any decision to allow imports could represent a major change in the country's sugar trade policy.
A large-scale increase in Indian sugar purchases could potentially support international sugar prices, while additional imports could help increase domestic availability and ease prices for Indian consumers during the festival season.
Ethanol Policy Also Under Review
The government's latest consideration comes shortly after reports that India is examining whether to reduce the quantity of sugarcane diverted towards ethanol production during the sugar season beginning in October.
Redirecting more sugarcane towards sugar production could increase domestic sugar output and help improve availability. The move would also provide policymakers with another tool to manage the balance between sugar supplies, ethanol production and domestic prices.
With sugar prices at record levels and festival demand approaching, the government's decisions on imports, stock limits, mill sales quotas and ethanol diversion could play an important role in determining the direction of India's sugar market in the coming months.
