India Sugar Imports: Why India is considering sugar imports as prices hit record levels

The measures are being considered as sugar prices have surged ahead of the peak festival season (representative image)

India is considering a series of measures, including limited duty-free sugar imports and tighter stockholding limits for bulk traders, to boost domestic supplies and rein in record sugar prices, government and industry sources said on Tuesday, according to Reuters.The measures are being considered as sugar prices have surged ahead of the peak festival season, when demand for the sweetener typically rises sharply.“Since there has been a completely unwarranted increase in prices, we will have to take measures to check prices, and we are considering a whole host of measures and tools,” a government source told Reuters, requesting anonymity in line with official rules.Among the options under consideration are lowering stockholding limits, permitting limited sugar imports, reducing import duties and changing monthly sugar sales allocations for mills, the source said.

Sugar prices jump nearly 20% in August

Wholesale sugar prices in Kolhapur, Maharashtra, one of India’s key sugar trading centres, have climbed nearly 20% since the beginning of August to a record Rs 5,350 per 100 kg.The sharp rise has come despite assessments that domestic supplies are sufficient to meet demand until sugar from the next season begins arriving, a second government source said.However, traders say supplies in the local market remain tight.“Local supplies are tight. Only imports can help increase supplies and bring down prices during the festival season,” Ashok Jain, president of the Bombay Sugar Merchants Association, told Reuters.India is the world’s biggest sugar consumer, and any decision to allow imports could have implications beyond the domestic market.Increased buying by India could support global sugar prices, while additional supplies could help New Delhi contain domestic prices.

Festival demand puts pressure on supplies

Sugar demand in India generally increases between August and November, coinciding with major festivals including Ganesh Chaturthi, Dussehra and Diwali.The period sees higher consumption of traditional sweets, confectionery and other sugar-based products, increasing pressure on domestic supplies.The government is therefore examining several policy options rather than relying on a single measure. Along with imports and stock limits, it is considering changes to the quantity of sugar mills are allowed to release for domestic sale each month.The government could also lower import duties to make overseas sugar more competitive in the Indian market.India has not relied on significant sugar imports for nearly a decade. Any decision to allow imports would therefore mark a notable shift in policy for the world’s largest sugar consumer.The government’s latest consideration comes days after Reuters reported that India was looking at reducing the amount of sugarcane diverted towards ethanol production in the season beginning in October.The move would potentially leave more sugarcane available for sugar production, helping increase domestic output and ease prices.