New Delhi, August 25: Sugar prices in India are expected to rise around 7 per cent during the current season despite the government's decision to allow duty-free imports as low inventories and firm domestic demand continue to keep the market tight, according to Crisil Intelligence.

The research and analytics firm's latest impact note said the import intervention is expected to moderate the increase in prices, prompting it to lower its earlier forecast of a 9 per cent rise.

"The additional supply is expected to moderate the increase in sugar prices, with average SS26 prices now projected to rise ~7%, compared with the earlier estimate of 9%," Crisil Intelligence said.

For the 2025-26 sugar season (SS26), which runs from October 2025 to September 2026, Crisil expects prices to continue rising in August and September despite the approval of imports, although the increase is now likely to be 300-500 basis points lower than its earlier expectation of about 15-20 per cent.

The import of one million tonnes of raw sugar is expected to improve closing inventories for SS26 to 4.9 million tonnes from an estimated 3.9 million tonnes and raise stock cover from about one-and-a-half months to nearly two months of domestic consumption.

"Although sugar production is estimated to recover by approx. 8% in SS26, robust domestic demand and low opening stocks are expected to keep inventories under pressure," the report said.

For sugar manufacturers, Crisil expects Ebitda margins of integrated mills to expand by only around 50 basis points in SS26, as gains from higher sugar prices and moderate volume growth are largely offset by higher sugarcane costs. Fair and Remunerative Price and State Advised Price for sugarcane are expected to rise 4.4 per cent and 8.3 per cent, respectively.

The profitability outlook is stronger for SS27, when lower inventories are expected to support sugar realisations and improved performance of distillery and cogeneration businesses could help industry margins expand by 100-200 basis points.

To curb the rising retail prices and secure local supply for the upcoming festive season, the government has approved the duty-free import of 10 lakh metric tonnes (1 million tonnes) of raw sugar, marking the country's first sugar imports in nearly a decade.

Alongside this, strict measures have been implemented to prevent speculative hoarding, including a 400-tonne stock limit for dealers, a 15-day inventory cap for bulk industrial consumers, and a mandatory 7-day timeline to lift purchased stock from mills. (ANI)