India’s lower sugar quota for domestic sales failed to tame demand, says industry

Even as speculation is blamed for the recent surge in retail sugar prices, which was Rs 47 per kg in May, the release of monthly quota by the government played a direct role in tightening supply, industry sources said.

Between October 2025 and May 2026, domestic sales allocations were 7 per cent lower than actual mill dispatches in the same period. With monthly quotas consistently matching or kept below the year-ago levels despite rising consumer demand, restricted market availability steadily drove up prices.

The Food Ministry, which regulates the sugar sector including allocating sales quotas to each mill every month, has approved 245.5 lakh tonnes (lt) until August in current sugar season that began from October 2025 for sale. If the September quota is maintained at the year-ago level’s 23.5 lt, the total allocation for domestic sales will be 269 lt, which will be 2.4 per cent lower than 275.5 lt in 2024-25 season.

While experts frame these tighter releases as a cautious strategy to maintain stock balance, even as some mills routinely breach quotas to sell excess volumes, industry sources said that as the season closes, the market is confronting actual inventory realities rather than optimistic official estimates.

Sources said that between October 2025 and May 2026, against an allotted quota of 178.5 lt, mills had despatched 191.5 lt of sugar to domestic market for sales, which was 7 per cent more than permitted quantity. Considering this, domestic consumption in 2025-26 season could be in the range of 288-290 lt.

“As the raw sugar imported duty-free under ALS scheme for re-export has been permitted for sales in domestic market, 3-5 lt sugar may be immediately available in the market. However, it depends on refiners since release of huge stock at once may crash the market and there may be calibrated release,” the source said.

Besides, there is no guarantee that retail and wholesale prices will come down after the release even if refiners sell at ex-mill rates, which started falling after duty-free import decision.

For instance, the all India average wholesale prices (Rs per quintal) of sugar were 6,036 on August 26, 5,923.88 on August 25, 5,829.94 on August 24, 5,866.67 on August 23, 5,617.53 on August 22, 5,381.39 on August 21, 5,153.72 on August 20 and 5,004.59 on August 19, according to data from the Consumer Affairs Ministry. The average wholesale price was Rs 4593.62/quintal on August 1. Retail prices too were at elevated levels, prompting some states to consider subsidised sales.

Trade sources said that the government was aware of higher sales than allotted quotas all through the season and it is also reflected in its monthly release order where it was mentioned how some mills were penalised due to violation of Rules under the Sugar Control Order.

“When the sugar production in current season fell during January, the government should have acted at that stage rather than waiting till almost end of the season. Since commodities rule on sentiments and till the time actual physical stock of imported sugar reaches market, the bullishness may remain,” said a senior trader.

According to Indian Sugar & Bio-Energy Manufacturers Association (ISMA), domestic consumption in 2025-26 is seen at 285 lt and production at 279 lt (excluding about 30 lt diversion towards ethanol). The closing stock on September 30 has been estimated at nearly 36 lt as it was close to 80 lt on July 31.