Daybreak - The great Indian sugar trap: how a decade of surplus left India with nothing to spare

Episode Date: August 27, 2026

India is importing sugar for the first time in nearly a decade — a million tonnes, duty-free — to cool prices before the festive season. Four years ago, it exported a record 11 million tonnes.Retail prices are up around 40% from last year. In Odisha, a kilo crossed ₹67. The government has capped stocks, halted exports and ordered mills to declare their sales.Production came in about 11% below forecast, at 30.6 million tonnes.The world's second-largest sugar producer just became an importer. How?Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

So this week, India is doing something that it hasn't done in nearly a decade. The world's second largest sugar producer is importing sugar, a million tons of it. And it is buying it at a time when sugar costs more in the world market than it has since early 2025, because the crop failed in Thailand, Brazil and across Europe as well. It is hard to imagine how just four years ago India sent 11 million tons of sugar out into the world. the most that any country had ever exported. And you can feel it on the shelf as well. A kilo of sugar costs about 40 to 50% more than it did this time last year.

In eight states, it's crossed 65 rupees a kilo. In Odisha, it hits 67 rupees and 40 pisa on the 23rd of August. A year ago, on the same day, a kilo of sugar was less than 50 rupees. Every winter, India sells sugar to the world. It is routine. gets cut, the mill starts crushing, and from about January before the Brazil crops reach the market, Indian sugar ships out through the ports. This past season was no different. We had been told that it would be a big year, more than 34 million tons of sugar. And when you expect a

surplus, you sell into the window while it is still open. Between the start of the season and May this year, close to 800,000 tons of Indian sugar sailed off to buyers around the world. But here's the thing about a ship that has already sailed. You can't call it back. Because you see, when India decided to let that sugar go, thinking it will have enough surplus, most of that surplus didn't actually exist. The cane was still standing in the fields of Maharajan, Uttar Pradesh. The more than 34 million tons was actually a forecast that basically told us

we would have enough to eat to burn into fuel and still have left over to export. Then this number started moving. First, it was trimmed in February, then cut again in March, and again in April until more than 34 million tons had become just over 30 million tons. About 11% shot. Now, I know 11% may not sound like a lot, but it is really the gap between comfortable and scrambling. By the time, anybody was sure of it, the sugar was gone,

sold somewhere off the coast of somewhere else. Now, I'm sure you've heard plenty of reasons why sugar got expensive this festive season. The weather, the hoarders, ethanol, always ethanol, and a lot of them are valid. But these are things that can happen any year. The real question is how the world's second largest sugar producer left itself so exposed that one bad year could tip it into importing a million tons of sugar. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Dha Sharma, and I don't

chase the new cycle. Instead, every day of the week, my colleague Rachel Vargheese and I will come to you with one business story that's worth understanding and worth your time. Today is Friday, the 28th of August. When we talk about the price of sugar, we usually picture the bag on the shelf. But the bag is actually the smaller end of the story. Most of India's sugar never reaches our kitchens as sugar at all. By the sugar industry's own estimate, roughly two-thirds of what India consumes goes to companies, not households, the makers of your soft drinks, your biscuits, ice creams, cola at the wedding, the burfi in the box. And here is the proof of how lopsided it has become. The amount of sugar in average Indian consumes in a year has barely moved, stuck

around 19 to 20 kilos per person. And yet, the country's total demand keeps climbing. So, if most of the sugar is not even yours to buy, why does this spike start? land on you. Because you pay for it twice. Once at the counter on the kilo that you take home and then again all year inside everything sweet that you didn't make yourself. When raw sugar jumps 40% that costs right straight into the biscuit, chocolate, cold drink and the timing is also very brutal. Because India's sugar demand anyway climbs every year from August to November for the festive season and it goes straight into the wedding season. And this is the exact window that this squeeze is hitting.

The government had to release extra sugar into the market just to meet the festival demand. Which brings us to the government's import plan and who it actually helps. Faced with record prices, the government did something that it had not done in nearly a decade. Like I told you, it opened the border to 1 million tons of raw sugar, duty-free to cool the market before the festivals. But look closely at how that sugar is coming in. Applications to import the sugar are limited to companies with their own refineries, the big port-side refiners who process raw sugar at industrial scale.

It flows through the whole wholesale chain to the same industrial buyers who already dominate the demand. So this is sugar that the household will most likely not touch directly. And here is the tell. Within days of the announcement, factory gate prices fell nearly 20%. Retail stayed the same. By late August, wholesale sugar had eased to 58 rupees a kilo while the shelf price sat at 63 and even higher in many states. So the relief was real, but it landed upstream where the big buyers are and thinned out on its way down to you. But let me make it clear. Nobody sat in a room. decided to rescue the corporations first. The system itself is built around the buyers who move the volume. So when health flows, it flows to them first by default. The household absorbs the squeeze coming and going and weights at the back of the line for the fix.

Which brings us back to the real question. How did the world's second largest sugar producer end up importing sugar? More on this in the next segment. Before we go any further, let's see. deal with the big villain of the sugar story that's being discussed everywhere right now. Ethanol. The logic is that India blends more of its cane into fuel every year. So surely that's what's gone missing from our sugar bowl.

But the numbers actually do not support it. By the government's own accounts, the share of sugar going to ethanol actually fell this year, from about 12% three seasons ago to around 9% now. And close to three quarters of India's ethanol actually no longer. comes from sugar cane at all. It comes from grain, mostly maize. So whatever squeeze the supply, it wasn't the fuel. To be honest, the case for the government is stronger than the critics allow. There was also a real crop failure. A disease called red rot spread through the cane fields of Uttar Pradesh and water logging damaged the crops in Maharashtra and Karnataka. So the amount of

sugar mills could extract from each ton of cane dropped. Now, none of this could have been predicted in November when the season's big decisions were made. No forecast can anticipate a disease outbreak in six months. And for months, the industry's own associations kept saying that there was no genuine shortage that the stocks were sufficient and the price rise was driven by speculation rather than scarcity. That was a reasonable position held by people who follow the crop closely. So let's give them that. A bad harvest cannot be blamed on anyone. So the weather is not to blame and neither is. ethanol, which leaves us with the main question unanswered still. How did we end up importing? The answer comes in three layers and only the first one is on the surface. India ran its surplus

down on purpose. For a decade, the problem was too much sugar. It clogged warehouses and tied up the mills money. So policy worked to drain it through exports and through fuel. And it worked. India opened the 2024-2020-season with about 8 million tons in reserve and it opened this one with around 3 and a half. The cushion was roughly halved in two years. The second layer. The whole market runs off on one number. The government sets how much sugar mills can sell each month, how much leaves the country and how much cane goes into fuel. Every lever is keyed into a single production forecast.

And when that forecast is to how much. every one of those decisions releases more than it should, all in the same direction. So the export door stays open into spring based on a number that was already being cut. And the third layer, the one underneath all of this, is that the mills had already sold the sugar cheap. Now, here is the trap that they were in. You see, the government sets a floor price below which mills are not allowed to sell their sugar. That floor has been stuck at $31 a kilo since 2019, while the price that Mills must pay farmers for cane has kept climbing. By the industry's own reckoning, it now costs them about $40 to produce a kilo that they are selling near 30.

The two lines basically crossed. For most of the season, Mills was selling sugar below what it cost them to make, and by the industry's own account, they offloaded three quarters of their stock at a long. just to raise the cash to pay the farmers. So by the time that the shortfall was clear, the cushion was gone. It was sold off at the bottom of the market by the mills who could not afford to hold it. And this is the shortfall that sent wholesale prices to a 16-year hike. India is now betting on imported sugar and an early crushing season to get prices down before Diwali.

Whether that is enough depends on how fast the sugar rise. and how much the next crop recovers. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of a subscriber-only offerings and a full subscription offers daily, long-form feature stories, newsletters and a whole bunch of premium podcasts. To subscribe, head to the Ken.com and click on the red subscribe button on the top of the website.

Today's episode was hosted and produced by my colleague, Snitha Sharma, and edited by Rajiv CN.