In today's FirstScroll, we break down why India is importing sugar duty free in the middle of a festive season, and explain why the country that shipped 20 lakh tonnes out is now buying it back.
Quick note before we start. This one has a lot of moving numbers, so we have kept the maths to the essentials. With that out of the way, let's dive into today's story.
The Story
Last October, the mills in Kolhapur and Meerut fired up their boilers in an unusually good mood.
The monsoon had been generous. The cane in the fields was thick, the acreage was up, and everyone in the industry was quietly preparing for a bumper year.
In November, the industry's own forecaster put a number on that optimism. It projected net output of 30.95 million tonnes against domestic demand of 28.5 million tonnes, and called it a comfortable sugar balance. Delhi agreed, and cleared 15 lakh tonnes of exports, then topped it up with another 5 lakh in February.
Then the crop came in.
Cane recovery rates slipped, some regions got less rain than they needed, and the bumper harvest kept getting revised down. By early August, production for the season was being pegged at about 27.9 million tonnes, which is less than the country eats in a year.
The market noticed before the policy did. Wholesale rates rose about 32% in two months, from roughly ₹4,400 a quintal in June to nearly ₹5,800 now. In parts of Uttar Pradesh, retail sugar crossed ₹60 a kilo while the government's own price monitoring showed a national average of ₹51.68.
So Delhi started reversing. It banned sugar exports till September in May, put stock limits on traders in August, and on 20 August allowed 10 lakh tonnes at zero duty to come in from abroad.
So here's the question: how does the world's second largest sugar producer spend one winter exporting sugar and the next summer importing it?
You see, sugar in India is not really a market. It is a balance sheet that the government redraws every year, and it has four boxes: the stock left over from last season, this season's production, the cane diverted to ethanol, and what the country consumes.
Only the last box is predictable. Indians eat close to 28 million tonnes of sugar a year, festivals included, and that barely moves.
Everything else is an estimate made in November about a crop that will not finish being cut until March. Export permissions, ethanol contracts and stock policy all get set on that November guess. When the guess is 3 million tonnes too generous, the error does not show up until the sugar is already on a ship.
Now, the ethanol box deserves a closer look, because it is the part most people miss. Mills can turn cane juice and molasses into fuel instead of crystals, and this season roughly 3.1 million tonnes went to ethanol rather than to kitchens.
That volume is locked in by supply contracts with the oil companies, so it does not shrink when the crop does. Which means a bad harvest lands almost entirely on the food side of the ledger.
Now, why import at all when India normally taxes foreign sugar at 100%? Because the duty is a wall, and a [tariff rate quota](INTERNAL: tariff rate quota explained) is a door built into it: a fixed quantity, in this case 10 lakh tonnes, allowed in duty free until 31 October, and only refiners with the capacity to process raw sugar can apply.
The wall stays up. The door shuts on schedule.
And for each player, the logic is different.
For the government, this is a festive season problem. Sweets, beverages and packaged food all pull hardest between September and November, and a visible spike in a kitchen staple is the kind of inflation voters can taste.
For the mills, the rally is the first good news in years. Cane's Fair and Remunerative Price has climbed to ₹3,650 a tonne for the coming season, while the minimum price at which mills are allowed to sell sugar has stayed unchanged since February 2019 at ₹3,100 a quintal. Their input price has been rising by policy while their price floor has been frozen by policy.
But here's the twist. The import window has opened at the worst possible moment to be a buyer.
New York raw sugar has climbed to around 16.9 cents a pound, its highest since August 2025, with a strong El Niño threatening cane in Brazil, Thailand and India itself. India is not importing from a glut. It is importing into a global market that is tightening at the same time, which is exactly the situation its export permissions were supposed to help it avoid.
There is a second twist, and it is a slower one. If sugar keeps selling at record prices while [ethanol procurement rates](INTERNAL: india ethanol blending programme explained) stay fixed, mills will simply make less ethanol next season and more sugar, because that is what the numbers tell them to do. The food policy and the energy policy are now quietly pulling the same cane in opposite directions.
Now to be clear, nobody is running out of sugar. The industry insists there is no shortage of sugar in the system, mills have offered to start crushing 10 to 15 days early to get fresh supply out sooner, and the imported raw sugar still has to be refined before it reaches a shelf.
So, is this a policy failure or just weather? Well, a bit of both, and that is the uncomfortable part. India runs one of the most managed food markets in the world, with a floor price for mills, a guaranteed price for farmers, export quotas, stock limits and an ethanol mandate stacked on top of each other, and all of it rests on one forecast made before the harvest is in.
Whether ten lakh tonnes of raw sugar can be shipped, refined and distributed before Diwali is something only time will tell.
Until then…
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