India has allowed duty-free import of 10 lakh MT of raw sugar for the first time in a decade, after prices surged up to 40% amid poor monsoon and reduced sugarcane output. Critics link the move to the E20 ethanol rollout, arguing diversion of sugarcane to fuel has turned a major exporter into an importer and may trigger broader food inflation across maize, rice and poultry.
FOR THE FIRST TIME in a decade, India, once competing among the biggest sugar exporters in the world, has announced duty-free import of sugar for traders, mills, and wholesale buyers. On Thursday, August 20, 2026, the Commerce Ministry of India notified that 10 lakh metric tons (MT) of raw sugar imports will be cleared without tax till October 31, 2026. This follows the recent price hike of the product due to the shortage of sugarcane yield in the Indian market.
Just two years ago, in 2022-23, India became the second biggest sugar exporter in the world, standing only behind Brazil. Now, this move by the government is seen with skepticism about how one of the biggest exporters has to rely on other countries to meet its demands. The opposing voices grew strong, especially when a major portion of sugarcane was recently diverted to produce Ethanol as part of the center’s mandate E20 rollout. While concerns over sugar prices rise with the festive season ahead, experts also warn of how the ethanol policy can have adverse effects on larger food economy
According to reports, sugar prices have hiked 10% over the past month and 40% in the last two months, hitting a record high since April 2025. India is among the biggest sugar consumers in the world, with the majority of the produce grown locally in sugarcane farms in Maharashtra and Karnataka.
Sugar demand in the country usually surges between August and November as major festivals like Raksha Bandhan, Ganesh Chaturthi, Diwali drive the market needs as production of sweets and confectionary items grow. That is why the government's deadline of October 31 is seen as a relief for traders, mills, and large confectionary manufacturers in this season.
One of the reasons behind the low yield of sugarcane— a water intensive crop— is lower than average rains during monsoon season. This year, the sugar mills are planning to start crushing sugarcane from the harvest slightly earlier than their usual crushing period of November to boost further supply of sweeteners in the market.
Political experts, commentators, and opposition leaders have linked this government’s decision to import sugar with the its recent mandated push of 20% ethanol-blended petrol. Tehseen Poonawalla, entrepreneur, political analyst and recently seen as a prominent protesting voice against the E20 rollout, called it a “sugar scam,” highlighting how the country was once among the biggest exporters of ethanol.
He wrote on X, “BETAs of NETAs (sons of politicians) got PSU banks loans for their Ethanol distilleries & a forced market was created for the Ethanol they produced with our Sugarcane and our money. That market for their overpriced Ethanol is our vehicles: totally totally screwing our vehicles & denying us a choice.”
Congress leader Jairam Ramesh and Aam Aadmi Party National Convenor Arvind Kejriwal reacted to the Commerce Ministry's notice and linked it to the Ethanol policy. They pointed out the irony about how the policy was brought in with the aim of cutting down oil imports but instead now the country has become a sugar importer as well.
According to reports, the warning signs of low yield of sugarcane this year were already present. On August 17, 2026, Government’s Chief Economic Advisor, V. Anantha Nageswaran, in his column for The Indian Express, flagged more such food price hikes in the future if the center continues with its mandated E20 rollout. He not only reflected on the rising sugar prices, but also explained how the larger food economy will be affected.
Earlier in August 2026, Reuters reported that the government has already shifted away from using sugarcane as the main crop for ethanol in response to the rise in demand and market shortage. According to reports, 30 lakh MT of sugarcane— amounting to 10% of the total annual produce— was used for ethanol production in the last season alone, driving the government's decision to cut down on the same.
However, CEA Nageswaran wrote that just cutting sugarcane produce will not resolve the larger problem as the ethanol demand still needs to be fulfilled. This will put strain on other crops like maize and rice. One of the most striking points from the Indian Express column is how the economist evaluates the domino effect this will cause on other food items as well.
Taking the example of maize, the government official writes that the excess use in the ethanol production will increase the grain’s price. As corn is also used as a feedstock for poultry and other livestock animals, any surge in its prices will also affect poultry food items and the larger economy as well.
The government has not given any reason behind the recent price hike and its reason for allowing duty-free sugar. All India Radio, the government's public broadcaster, posted a clarification on X, telling people to refrain from calling it a “crisis” or “dependence.” It called the move a “routine step to stabilise the market.” However, the ones who have been protesting against the mandated E20 rollout for months have linked it to the government's policy and are voicing out their grievances.
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