India will allow duty-free imports of 1 million metric tons of raw sugar through October 31, the government said on Thursday, as it moves to ease a sharp rise in domestic sugar prices ahead of the peak festival season.

The Commerce Ministry’s decision comes after sugar prices in India surged nearly 40 per cent over the past two months as lower production tightened supplies. India, the world’s largest sugar-consuming country, is importing sugar for the first time in nearly a decade.

Following the announcement, global sugar prices rose sharply. London white sugar futures and New York raw sugar futures climbed as much as 4 per cent, reflecting expectations that India’s purchases could increase international demand.

India currently imposes a 100 per cent import duty on sugar. Under the new arrangement, sugar mills and refiners with operational capacity to process raw sugar into refined white sugar can apply for a tariff-rate quota allowing imports at zero duty.

Applications will be accepted from August 21 to August 28, with preference given to importers that commit to completing shipments by October 15.

The government has also permitted port-based refineries to sell refined sugar in the domestic market from raw sugar they have already imported under duty-free arrangements. The move could potentially add about 300,000 metric tons of sugar to the local market relatively quickly, according to a Mumbai-based dealer with a global trading company.

However, another industry source in New Delhi said most new raw sugar imports are likely to come from Brazil, with shipments taking nearly two months. This means the impact on domestic supplies could become more visible from October.

India’s festival season typically brings a significant increase in sugar consumption as demand rises for traditional sweets and other food products.

Ashok Jain, president of the Bombay Sugar Merchants Association, said the import decision should help contain the recent rally in domestic sugar prices, even though global prices have risen on expectations of increased Indian buying.

The government’s move is aimed at balancing consumer needs with supply constraints while ensuring adequate sugar availability during the upcoming festive period.