India weighs giving the world a sweeter sugar tax

India, the world's second-largest sugar producer, is contemplating lowering its import duty on sugar to alleviate domestic price hikes that have reached a record high. Officials are exploring the possibility of eliminating the 100% tax on imported shipments, aiming to increase local supplies, according to sources familiar with the matter. This comes just before a seasonal surge in sugar demand due to the upcoming festival season, which adds pressure to curb rising prices.

The move also highlights the supply strain in the global sugar market, with concerns growing that El Niño weather patterns could further reduce harvests. New York futures for sugar reached their highest level in about a year due to worries about crop shortages. In India, monsoon rains, crucial for sugarcane production, are currently 13% below normal, particularly near the end of June. This follows the rainy season's onset, leading to delays in sowing certain crops.

Ex-mill sugar prices in Maharashtra recently reached an all-time high of 46 rupees (48 cents) per kilogram, reported the Indian Sugar and Bio-energy Manufacturers Association (ISMA). Consumption in India typically peaks from late August through January, driven by demand for traditional sweets, processed foods, and beverages during the festival season.

To address supply concerns, factories in India's top sugarcane-producing states of Uttar Pradesh and Maharashtra plan to advance crushing operations by 10 to 15 days, earlier than the usual early-November start. This adjustment was made in consultation with the food ministry to bolster sugar supplies. The government has also set stockpile limits for traders to curb hoarding and mitigate inflation risks.

India does not usually import sugar for domestic consumption, with the last significant imports occurring in 2017-18, according to ISMA data. Sugarcane was planted on 5.83 million hectares (14.4 million acres) as of August 14, slightly below the same period last year, as per the farm ministry.