How Fluctuating Sugar Prices Affect Consumers: The Case of Cheeni Kum and the Delay of Imported Sugar

Sugar prices in India have surged sharply, with the all-India average retail price reaching Rs 64.24 per kilogram, marking a nearly 30% increase from the previous month and a 38.63% rise compared to last year. In some markets, consumers are facing prices as high as Rs 70 per kilogram. The spike in sugar prices is attributed to a combination of reduced supply and increased demand, particularly as the festive season approaches.

Supply Shortfall and Rising Demand

India’s sugar production for the 2025-26 season is now projected at approximately 306 lakh metric tonnes (LMT), which is nearly 11% lower than the initial estimate of 343 LMT. This decline is primarily due to crop damage from diseases like Red Rot and Top Borer, as well as waterlogging from excessive rainfall. As demand rises with the upcoming festivals, households and businesses are stocking up, further straining supply.

International sugar prices have also risen over 16% in the past two months, adding to domestic concerns. Reports of hoarding and speculation among traders and mills have exacerbated the situation. In response, the government has permitted the duty-free import of 10 lakh tonnes of raw sugar and implemented stock limits to mitigate hoarding.

Price Adjustments at the Mill Gate

Despite the ongoing challenges, ex-mill sugar prices have seen a significant correction. After peaking at Rs 62-67 per kilogram, prices have dropped nearly 20% to around Rs 55 per kilogram. Food Secretary Sanjeev Chopra described the earlier price surge as “unjustified,” attributing it to mills restricting stock releases. The market reacted positively to the government’s import announcement, which eased fears of a supply crunch.

The Directorate General of Foreign Trade has opened applications for sugar mills and refiners to import raw sugar, with a focus on those capable of refining it into white or refined sugar. This measure has shifted market expectations, leading to a decline in prices even before the imported sugar arrives.

Retail Prices Remain High

Despite the decrease in mill gate prices, consumers are still facing high retail prices. As of late August, the average retail price was Rs 64.24 per kilogram, up from Rs 63.12 just a week earlier. Prices vary significantly across cities, with reports of sugar selling for Rs 62 in Delhi, Rs 66 in Mumbai, and as high as Rs 74 in some areas. The gap between ex-mill and retail prices remains, as wholesalers and retailers continue to sell sugar purchased at higher prices.

The consumer affairs ministry noted that while wholesale prices have also risen, the correction at the mill level has not fully translated to retail shelves. This delay is due to existing stocks in the supply chain that were acquired at elevated prices.

Clarifying the Sugar Shortage

The government and industry experts have clarified that while sugar production is down, there is no outright shortage. Domestic consumption is estimated at 280-285 lakh tonnes, indicating sufficient stocks to meet demand. However, the industry acknowledges a tighter supply cushion, with opening stocks at the beginning of the season around 47-50 lakh tonnes.

The festive season is expected to further increase demand, complicating the supply situation. Global sugar prices have also risen, contributing to domestic price pressures. The government anticipates a global sugar deficit of approximately 33 lakh tonnes in 2026-27, but both government and industry officials attribute the recent price surge to panic buying and speculation rather than a physical shortage.

Government Measures to Stabilize Supply

To address the situation, the government is implementing measures to ensure sugar flows from mills to consumers. Starting in September, the monthly quota system will shift to fortnightly allocations, requiring mills to sell a minimum percentage of their quota within a week. Bulk consumers will face stricter stock limits, and inspections to prevent hoarding will be intensified.

The upcoming domestic crushing season, beginning around October 15, is expected to boost sugar production significantly. Mills are anticipated to produce over 10 lakh tonnes in October alone, compared to the usual 3-4 lakh tonnes. This early crushing, along with the duty-free imports, aims to enhance market availability and stabilize prices.

Crisil Intelligence has revised its forecast for sugar prices, projecting a rise of around 7% for the 2025-26 season, down from 9%. The additional imports are expected to increase closing stocks, improving the supply situation.

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