Despite Duty-free Imports, Sugar Prices To Remain Elevated
“Domestic sugar prices are to correct from recent record highs, but remain healthy, supported by tight inventory conditions and rising cane procurement costs. Policy measures, such as potential restrictions on sugar diversion to ethanol, will be a key variable for sugar prices after crushing begins October”, says Khushbu Lakhotia, Director, Corporate Ratings, Ind-Ra
Chennai: The duty-free imports of one million tonnes of raw sugar will improve near-term sugar availability. However, tight inventories, higher cane procurement costs, and limited acreage growth is expected to keep domestic sugar prices elevated and diversion of sugar for ethanol production will be key to price movement.
“Domestic sugar prices are to correct from recent record highs, but remain healthy, supported by tight inventory conditions and rising cane procurement costs. Policy measures, such as potential restrictions on sugar diversion to ethanol, will be a key variable for sugar prices after crushing begins October”, says Khushbu Lakhotia, Director, Corporate Ratings, Ind-Ra.
On 20 August 2026, the government permitted the duty-free import of one million tonnes of raw sugar under a Tariff Rate Quota (TRQ) until 31 October 2026 to alleviate the tight domestic sugar supply situation. The decision marks India's first duty-free sugar import for domestic consumption since 2017-18.
Domestic sugar prices surged to a record high of Rs 57 per kg in August 2026. Prices have been rallying since June 2026 and averaged around Rs 50 per kg during the first three weeks of August 2026, representing an increase of 15% month-on-month and 23% year-on-year.
Ind-Ra believes that the recent import notification will improve near-term sugar availability, ease concerns over supply tightness, and help correct prices from the recent highs to more sustainable levels.
However, tight inventories, higher cane procurement costs, and limited acreage growth is expected to keep domestic sugar prices elevated relative to historical averages. Sugarcane acreage for next crop year may remain flattish and a weaker yield could weigh on sugar production.
Further, the increase in the fair and remunerative price by the Centre for 2027 by Rs 10/quintal to Rs 365/quintal would raise sugar production costs by around Rs 1/kg during 2HFY27-1HFY28.
The global sugar balance sheet is also gradually shifting from the comfortable surplus environment seen in 2025-26 towards a tighter outlook for 2026-27 due to weather-related production risks, rising input costs, changing ethanol-sugar economics, and policy interventions across key producing regions to narrow global sugar availability.