India's sugar squeeze threatens its biggest season for sweets

ByArchana Shukla BBC News, Mumbai.

Key points

• The administration initially approved exports of 1.5 million tonnes this season, adding another 500, 000 tonnes in February.
• US administration forecasters expect global production to fall to 184.9 million tonnes this season, from a record 186.1 million tonnes the year before.
• The move comes as demand surges from August, with festivals such as Ganesh Chaturthi, Dussehra and Diwali leading into the busy wedding season.
• That is where the imports will support provide a buffer, states Atul Chaturvedi, non-executive director of Shree Renuka Sugars, India's largest sugar refiner and a major ethanol producer.
• Sugarcane is highly water-intensive, and uneven monsoon rains and prolonged dry spells in key growing states such as Maharashtra, Uttar Pradesh and Karnataka have affected the crop.

India, the world's largest consumer of sugar, is trying to avoid a bittersweet festive season.

Sugar rates have jumped almost 40% previously two months, prompting the administration to import 1 million tonnes for the first time in almost a decade.

Meanwhile, the move comes as demand surges from August, with festivals such as Ganesh Chaturthi, Dussehra and Diwali leading into the busy wedding season. Food and beverage firms additionally commence stocking up for one of their busiest sales periods, adding pressure on wholesale costs.

Production is now projected to be 30.6 million tonnes in the current season. It runs from October 2025 to September 2026 – 11% below the government's earlier estimate of 34.3 million tonnes.

Meanwhile, the squeeze has sent rates soaring. Although costs have begun to ease slightly, a kilo of sugar that cost around 40-45 rupees ($0.42-0.47; £0.31-0.35) in May-June was selling for more than 58-60 rupees in a number of markets in August.

But how did a country, which is additionally the world's second-largest sugar producer, end up needing imports?

In practice, the administration has blamed lower sugarcane production linked to reduced rainfall during El Niño, hoarding and tighter global supplies after adverse weather hit other major producers.

But experts say another key factor was that India overestimated its own production – and allowed sugar to be exported before the extent of the shortfall became clear.

Notably, the administration initially approved exports of 1.5 million tonnes this season, adding another 500, 000 tonnes in February. Almost 800, 000 tonnes had been shipped before exports were halted in May.

"From allowing exports at the start of the season to ending with an import of a million tonnes is a large variation on production estimates – and that's a big surprise, " remarked Vikram Suryavanshi, a senior analyst at PhillipCapital India.

That matters since India has little sugar to spare. It consumed more than 28 million tonnes last season, not far below what it expects to produce this year.

Almost three million tonnes is additionally projected to be diverted to ethanol production, leaving little room for any shortfall.

For three months from 1 September, sugar refineries in special economic zones near ports – which normally import raw sugar, refine it and re-export it – will be allowed to sell duty-free sugar in the domestic market.

When the country was grappling with drought, the last time India imported sugar for domestic consumption was almost a decade ago.

Other measures are additionally under way. The Indian Sugar Mills Association (ISMA) has asked mills to commence crushing cane a fortnight earlier than usual to build stocks as the new harvest starts arriving in October. But that crop, too, faces risks from erratic weather.

Sugarcane is highly water-intensive, and uneven monsoon rains and prolonged dry spells in key growing states such as Maharashtra, Uttar Pradesh and Karnataka have affected the crop. While thinner cane with lower sucrose content means less sugar can be produced, yields are projected to fall.

"Looking at the climate conditions, the next season is also not going to be a bumper crop, although it is too early for actual assessment, " Chaturvedi remarked.

India has frequently restricted agricultural exports when domestic supplies tighten and rates rise. In 2023, for instance, it banned exports of non-basmati white rice for more than a year after crop damage contributed to rising food rates.

But experts say the failure to anticipate the sugar shortfall before allowing exports has raised questions regarding the government's forecasts.

"This year, the initial projections for sugarcane production did not materialise due to unusual weather in some parts and disease in certain varieties, " remarked Siraj Hussain, a former secretary at the federal agriculture ministry.

Notably, the administration has not explained why the scale of the shortfall was not identified before exports were halted on 13 May. It has remarked production fell below estimates as of sugarcane disease and waterlogging caused by excessive rainfall. The BBC has contacted the agriculture ministry for comment.

Some commentators have additionally blamed the diversion of sugarcane to ethanol production for the shortage in a deficit year. Even earlier, sugar mills would set aside around 10% of their output for this, helping stabilise rates in times of excess production.

But India making E20, or petrol blended with 20% ethanol, the standard fuel at pumps this year, just as sugar output is low, has continued to the challenge, experts say.

Notably, the administration disputes how much the policy is to blame. It notes the share of cane diverted to ethanol has fallen from 12% in 2022-23 to around 9% in 2025-26, and argues that fragile production, hoarding and tighter global supplies are behind the sugar cost surge.

Some in the industry agree. Deepak Ballani of the Indian Sugar Mills Association (ISMA). It represents private mills producing almost half of India's sugar, states stocks and monthly quotas for sugar published into the market are comfortable. He argues speculation and hoarding, rather than a genuine shortage, are driving rates higher.

In practice, the administration has capped stocks held by traders and wholesalers at 400 tonnes for three months to curb hoarding.

Suryavanshi, nevertheless, disagrees. India has applied such measures before, he states, yet rates continued to climb after the latest restrictions were unveiled. To him, that points to a real supply squeeze. And India's decision to import comes as supplies are tightening globally.

While heavy rain has disrupted cane harvesting in Brazil, the world's largest sugar producer, where mills are additionally diverting more cane to ethanol, el Niño has affected rainfall in Thailand. Heatwaves have battered Europe's sugar beet crop, with France expecting its worst harvest in four years.

While New York raw sugar futures jumped 4% on the day India confirmed its imports, london white sugar futures hit $541 a tonne in mid-August, their highest since April 2025.

For India, nevertheless, sugar availability could improve next year if high costs prompt mills to divert less cane to ethanol.

"At current sugar prices, it simply doesn't make economic sense for mills to divert cane juice to ethanol, so India's sugar scenario should be quite all right going forward, " Chaturvedi remarked.

But the bigger lesson from this year's squeeze, he continued, is clear: it is a "warning that going forward, we need to be a lot more careful in estimating our sugar crop numbers".

For now, india' s sugar squeeze threatens its biggest season for sweets remains the part of the story worth watching, and further updates are likely as more details are confirmed.