By Tapan Moharana
NEW DELHI, Aug 23: The government’s decision to allow duty-free imports of 1 million tonnes of raw sugar is likely to bring some relief to the domestic market, particularly ahead of the festive season. But the move may not be enough to change the broader supply outlook for the sugar industry in FY27, India Ratings and Research (Ind-Ra) said in a recent analysis.
The government on August 20 allowed the import of 1 million tonnes of raw sugar under the Tariff Rate Quota (TRQ) route until October 31. Ind-Ra expects the additional supplies to help replenish stocks that have fallen to relatively low levels and improve availability during the September-November period, when sugar consumption generally picks up.
The need for imports has emerged after a weaker-than-expected sugar production season. India’s net sugar output in SS26 is estimated at around 27.8 million tonnes, roughly matching domestic consumption. Sugar inventories are estimated to have fallen to about 4.5 million tonnes by the end of the season, below the normative level of around 5.5 million tonnes.
“The imports would replenish inventories closer to normative levels and improve market availability during the peak consumption period,” said Khushbu Lakhotia, Director, Corporate Ratings, Ind-Ra. She, however, pointed to low opening stocks, largely unchanged sugarcane acreage and uncertainty over the next crop as factors that could continue to support prices.
Sugar prices have risen sharply in recent months. Domestic prices touched ₹57 a kg in August, while the average price during the first three weeks of the month was around ₹50 a kg, up 15% from July and 23% from a year earlier, according to Ind-Ra. The agency expects prices to come down from the recent highs as imports arrive, although it does not expect a return to historically low levels.
One of the key factors to watch will be the SS27 sugarcane crop. Cane acreage stood at 5.83 million hectares in mid-August, almost unchanged from 5.86 million hectares a year earlier. Ind-Ra said production will ultimately depend on yields and sugar recovery, both of which can be affected by weather. Rainfall was 13% below the long-period average up to August 19.
Ethanol policy could also influence the sugar balance. Ind-Ra expects the government may consider limiting the diversion of sugarcane towards ethanol if additional sugar supplies are needed in the domestic market.
Meanwhile, global sugar markets are also facing tighter supply prospects. Weather risks, changing sugar-to-ethanol economics in Brazil and production concerns in Thailand are expected to lend support to international prices.
For sugar mills, the combination of firm domestic prices and higher cane costs could keep margins under pressure, but Ind-Ra expects healthy sugar prices to provide some cushion to profitability in FY27.