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

**Snigdha Sharma** (0:01)
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 percent more than it did this time last year. In eight states, it's crossed 65 rupees a kilo. In Odisha, it hit 67 rupees and 40 paisa 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. The gain gets cut, the mills start 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 Ken was still standing in the fields of Maharashtra and 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% short. 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 hordes, 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 would tip it into importing a million tons of sugar. Welcome to Daybreak, a business podcast from The Ken. I'm your host, Snigdha Sharma, and I don't chase the news cycle. Instead, every day of the week, my colleague Rachel Varghese 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 barfi in the box. And here is the proof of how lopsided it has become. The amount of sugar an 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 still 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 refineries 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%.