India Allows Tax-Free Sugar Import in Rare Move to Cool Prices

India has permitted duty-free imports of 1 million metric tonnes of sugar to bolster supplies as domestic prices rise ahead of the festive season. The move aims to address the nearly 40% surge in sugar prices over the past two months, caused by tightening supplies, which has put pressure on consumers. This marks India's first sugar imports in nearly a decade, according to government data.

The decision coincides with tighter restrictions on sugar inventories held by bulk consumers, limiting stock to no more than 15 days of consumption. This regulation, effective from September 1, will remain in place until November 30. Bulk users, including biscuit and confectionery manufacturers, typically increase inventories ahead of festivals such as Ganesh Chaturthi, Dussehra, and Diwali, which typically drive consumption between August and November.

Sugar demand is expected to strengthen during this period, and bulk users are also expected to build inventories. Ex-mill sugar prices in Maharashtra have reached record levels, with concerns over sugarcane availability due to uneven rainfall and dry weather conditions. Monsoon rainfall, crucial for sugarcane cultivation, was 13% below normal towards the end of June, adding to supply concerns.

The Centre's decision to permit imports follows discussions with the food ministry, as sugarcane mills in Uttar Pradesh and Maharashtra plan to start crushing 10-15 days earlier than usual. This move aims to bring additional sugar into the market as demand rises. India is the world's second-largest sugar producer but does not typically rely on imports for domestic consumption, with the last substantial imports occurring in 2017-18.