India is grappling with a sugar crunch as prices soar nearly 40% in two months. The government has decided to import 1 million tonnes of sugar, a step not taken for almost a decade, amid the busy festive season.
Festivals like Ganesh Chaturthi, Dussehra, and Diwali, along with the wedding season, have driven demand high, straining sugar availability. Food and beverage companies are stocking up for a busy period, tightening the market further. The production forecast for the season, from October 2025 to September 2026, has been cut to 30.6 million tonnes, down 11% from the earlier estimate of 34.3 million tonnes.
Several issues have led to the shortfall. The El Niño weather pattern has reduced rainfall, affecting sugarcane yields. Hoarding and a tighter global supply have worsened the situation. India initially misjudged production levels, allowing sugar exports before realizing the shortage's depth. The government approved exports of 1.5 million tonnes at the season's start, adding 500,000 tonnes in February, with nearly 800,000 tonnes shipped before halting exports in May.
Analysts like Vikram Suryavanshi from PhillipCapital India are surprised by the shift from exporting to importing sugar in the same season. With domestic consumption surpassing 28 million tonnes last season and almost 3 million tonnes expected for ethanol production, imports are seen as necessary.
Sugar refineries in special economic zones near ports will be allowed to sell sugar domestically without duty for three months starting September 1, aiming to ease the shortage. Challenges remain. The Indian Sugar Mills Association (ISMA) has urged mills to start crushing cane earlier to build stocks, but unpredictable weather threatens the new harvest.
India's sugarcane crop, heavily reliant on water, has suffered from erratic monsoon rains and dry spells in key growing states like Maharashtra, Uttar Pradesh, and Karnataka. These conditions have resulted in thinner cane with less sucrose, reducing sugar output. Atul Chaturvedi, non-executive director of Shree Renuka Sugars, warns that next season might not yield a bumper crop either.
India historically restricts agricultural exports when domestic supplies dwindle. In 2023, the country banned non-basmati white rice exports for over a year due to crop damage. Experts like Siraj Hussain, a former federal agriculture ministry secretary, criticized the government's oversight in not foreseeing the sugar shortfall before allowing exports, citing unusual weather and disease in certain sugarcane varieties.
The government's ethanol production policy has faced criticism, with some arguing it worsened the sugar shortage. Though the government asserts that cane diversion to ethanol has decreased, the introduction of E20, petrol blended with 20% ethanol, has added to the issue. However, Deepak Ballani of ISMA argues that speculation and hoarding, not a real shortage, are driving prices up.
Globally, sugar supplies are tightening. El Niño has reduced rainfall in Thailand, and heavy rains have disrupted cane harvesting in Brazil. Heatwaves have damaged Europe's sugar beet crop, with France anticipating its worst harvest in four years. The U. S. government predicts a drop in global production to 184.9 million tonnes this season, down from a record 186.1 million tonnes the previous year.
Chaturvedi remains hopeful that India's sugar situation will improve next year. He suggests that high sugar prices might deter mills from diverting cane to ethanol, potentially stabilizing the market. Nonetheless, he emphasizes the need for more precise crop estimates to prevent future shortages.
