India is the world's largest consumer of sugar, and is now trying to avoid a festive season that is 'sweet at first and then bitter'.
According to reports by the BBC on August 25th, sugar prices in India have risen by nearly 40% over the past two months, forcing the government to decide on importing 1 million tons of sugar. This is the first time in nearly a decade that India has imported sugar for domestic consumption.
This measure was introduced at a time when India's sugar demand is rapidly increasing since August. Festivals such as Dussehra, Durgapuja, and Diwali are coming one after another, followed by the busy wedding season. At the same time, food and beverage companies have also begun preparing supplies for one of the busiest sales seasons of the year, further increasing the pressure on wholesale market prices.
The sugar production season in India lasts from October 2025 to September 2026. Currently, the expected sugar production is only 30.6 million tons, which is 11% lower than the government's previous forecast of 34.3 million tons.
Supply shortages have caused sugar prices to rise significantly. From May to June this year, the price of sugar per kilogram was around 40 to 45 rupees (0.42 to 0.47 dollars, 0.31 to 0.35 pounds). By August, prices in many markets had risen to over 58 to 60 rupees per kilogram. Recently, prices have started to decline slightly.
But the problem is: India is not only the world's largest consumer of sugar, but also the world's second-largest producer of sugar. So why does it have to import sugar in the end?
The Indian government attributes the reasons to various factors, including El Niño phenomena leading to reduced rainfall, a decline in sugarcane production, market speculation, and a tightening of global supply due to adverse weather conditions in other major sugar-producing countries.
However, experts point out that there is another key factor: India overestimated its sugar production, and began exporting sugar before it actually realized the need to reduce production.
The Indian government initially approved an export quota of 1.5 million tons of sugar for this season. In February of this year, an additional 500,000 tons of export quota was granted. Before the export was suspended in May, India had already exported nearly 800,000 tons of sugar.
Indian senior analyst Vikram Suryavanshi from Phillip Capital said, "Allowing exports from the beginning of the harvesting season until having to import 1 million tons later shows that there was a significant deviation in the production forecasts, which is quite surprising."
This is important because India itself has very little surplus sugar available for consumption.
In the last sugar harvesting season, India's consumption of sugar exceeded 28 million tons. This does not significantly differ from the estimated production of 30.6 million tons this year.
Meanwhile, it is expected that nearly 3 million tons of sugar will be used for ethanol production. This means that India has hardly any surplus to deal with any additional supply shortages.
India's largest sugar refinery, and one of the main ethanol producers Shree Renuka Sugars, non-executive director Atul Chaturvedi stated that this is precisely where import of raw sugar can provide a buffering effect.
As the Indian festival season begins in August, the demand for sugar usually increases rapidly.
From September 1st until three months later, India allows sugar refineries located in special economic zones near ports to sell sugar to the domestic market duty-free. These companies typically import raw sugar, refine it in India, and then re-export it.
The last time India imported sugar for domestic consumption was nearly a decade ago. At that time, India was facing a severe drought.
India is also taking other measures.
The Indian Sugar Mills Association (ISMA) has requested sugar mills to start crushing sugarcane about two weeks earlier than usual, in order to establish a sufficient supply of sugar as the new crop of sugarcane begins to be available in October.
However, the new season of sugarcane also faces weather risks.
Sugarcane is a crop that heavily relies on water resources. The main sugarcane-producing regions, such as Maharashtra, Uttar Pradesh, and Karnataka, have recently experienced uneven monsoon rainfall and prolonged droughts, which have affected the growth of crops. It is expected that the per unit yield of sugarcane will decrease. Additionally, the sugarcane will become thinner and have a lower sucrose content, meaning that the same amount of sugarcane will produce less sugar.
Chaturvidi said, 'Given the current climate conditions, the next harvest season is likely not a year of good yields. Of course, it's too early to make an accurate assessment.'
In India, when there is a shortage of domestic agricultural products and prices rise, it is common for the country to restrict the export of agricultural products.
For example, in 2023, after crops were damaged, which led to increases in food prices, India imposed a ban on the export of non-Basmati white rice. This ban lasted for over a year.
However, experts believe that while sugar exports were allowed previously, the Indian government failed to predict this year’s sugar shortage in advance. This has led to doubts about the government’s ability to forecast agricultural production.
India's Federal Ministry of Agriculture former secretary Siraj Hussain said, “This year, some regions experienced abnormal weather conditions, and certain sugarcane varieties were affected by diseases. As a result, the initial predictions regarding sugarcane production did not come true.”
The Indian government has not explained why such a large-scale reduction in sugar production was not detected before the export ban was lifted on May 13th. The government stated that sugar production fell below expectations due to sugarcane diseases, as well as flooding in some areas caused by heavy rainfall.
The BBC has contacted the Indian Ministry of Agriculture and asked it for comments on this matter.
Some commentators also believe that using large amounts of sugar cane for the production of ethanol during years with reduced sugar production is also a significant cause of the current supply shortage.
In fact, even in the past, Indian sugar mills usually used about 10% of their production for ethanol production. During periods of surplus sugar supply, this practice helped to stabilize sugar prices.
But this year, India officially designated E20 gasoline—gasoline mixed with 20% ethanol—as the standard fuel sold at gas stations. This coincided with a decline in sugar production, and some experts believe that this further exacerbated market pressures.
However, the Indian government has different opinions regarding the extent of responsibility that should be assigned to ethanol policies.
The government stated that the proportion of sugarcane used in ethanol production has decreased from 12% in the 2022-2023 season to approximately 9% in the 2025-2026 season. The government believes that the increase in sugar prices is mainly due to weak production, hoarding, and a tightening global sugar supply, rather than the ethanol policy itself.
Some industry insiders also agree with this view. Deepak Ballani, the head of the Indian Sugar Mills Association, who represents private sugar mills in India and whose member companies account for nearly half of the country's sugar production, said that both the current stock of sugar in India and the government-approved quotas for sugar distribution to the market are at sufficient levels.
He believes that the main reasons for the rise in sugar prices are speculation and hoarding, rather than a real shortage of supply. The Indian government has imposed a rule that traders and wholesalers must not hold more than 400 tons of sugar inventory within three months, in order to curb hoarding.
But Suryavanshi does not agree with this. He says that India has also adopted similar measures in the past, but after the latest inventory restrictions were introduced, sugar prices continued to rise. In his view, this indicates that India is facing a real supply shortage.
Meanwhile, as India decides to import sugar, the global supply of sugar is also becoming tight.
The El Niño phenomenon has affected rainfall in Thailand; Brazil, the world's largest sugar producer, has also been affected by heavy rainfall, causing disruptions in sugarcane harvesting. Additionally, local sugar mills are shifting more sugarcane to ethanol production.
European beet cultivation has also been affected by heatwaves, with France expected to experience the worst beet harvest in four years.
The US government predicts that global sugar production this season will drop from a record high of 1.861 billion tonnes last year to 1.849 billion tonnes. In mid-August, London white sugar futures prices hit a peak of $541 per tonne, the highest since April 2025. On the same day India announced an import quota for sugar, New York raw sugar futures prices rose by 4% in a single day.
However, for India, if current high prices lead sugar mills to reduce the use of sugar cane for ethanol production, then the supply of sugar next year may improve.
Chaturvidhi said: 'At current sugar prices, it is economically impossible for sugar mills to use sugarcane juice for the production of ethanol. Therefore, in the long term, there should not be any major issues with India's sugar supply.'
But he believes that the more important lesson left by this year’s supply shortage is quite clear: “This is a warning: in the future, we must be much more cautious when estimating sugar production.”
