Sugarcane Supply, Not Ethanol, Behind Price Surge, Says Government

Sugar prices have climbed sharply over the past month, prompting the government to step in with measures aimed at improving supplies and keeping a check on prices.

According to the Ministry of Consumer Affairs, Food & Public Distribution, the average retail price of sugar rose to Rs 55.70 per kg on August 20, 2026, from Rs 48.18 per kg on July 20. In Bhopal, prices have reportedly risen to Rs 70 per kg from Rs 65 a week earlier.

The government has responded by allowing duty-free imports of 10 lakh tonnes of raw sugar and putting a limit on the amount of sugar that large bulk consumers can keep in stock.

So, what is behind the sharp rise in sugar prices?

On August 19, the Department of Food and Public Distribution directed businesses that consume more than 10 metric tonnes of sugar a month to hold stocks for no more than 15 days. The restriction covers confectioners, soft drink manufacturers, food processing companies, sweetmeat sellers and other institutional buyers.

The government has also amended the import policy to allow 10 lakh metric tonnes of raw sugar to be imported without duty under the Tariff Rate Quota system until October 31, 2026. The move is expected to add to domestic availability at a time when sugar prices are rising.

The rise has also raised questions over whether sugar being diverted for ethanol production is contributing to tighter supplies. The government, however, has rejected this explanation.

In a statement, the government said it was incorrect to attribute the recent increase in sugar prices to the diversion of sugar for ethanol production. It said the share of sugar diverted for ethanol had fallen from around 12% in 2022-23 to around 9% in 2025-26.

The government also pointed out that nearly three-fourths of the ethanol produced in India now comes from grains, particularly maize.

Industry representatives have also said ethanol is not the main reason for the current price increase. Bhairavnath Thombre, president of the West Indian Sugar Mills Association, said the share of ethanol produced through sugar diversion has fallen to around 30%, from 100% in 2020.

If ethanol is not the main reason, the focus then shifts to sugarcane production and overall availability.

Former Maharashtra Sugar Commissioner Shekhar Gaikwad said sugarcane production and yields have been declining, which is affecting sugar production. He added that any policy aimed at increasing sugarcane output would take around 30-36 months to have a meaningful impact.

The duration of the sugarcane crushing season has also come down in Maharashtra. Jayprakash Dandegaonkar, former president of the National Federation of Cooperative Sugar Factories, said factories that earlier crushed sugarcane for around 150 days were now operating for closer to 100 days as the business has become less viable.

Maharashtra is India's largest sugar-producing state, making the state's sugarcane output and crushing activity important for overall sugar supplies.

The government's own production estimate also points to a tighter market. It expects sugar production in the 2025-26 marketing year to be around 306 lakh tonnes, compared with the initial estimate of around 343 lakh tonnes made by sugarcane-growing states.

There is another issue the government is looking into: whether some sugar stocks are being held back from the market.

Food Secretary Sanjeev Chopra said the sharp rise in ex-mill prices was not acceptable and alleged that some sugar mills were selling stocks only on paper rather than physically releasing them into the market. He described this as creating an "artificial scarcity".

The government has instructed mills to ensure that sugar shown as sold actually reaches the market. It has also asked major sugar-producing states to prepare for an early start to

the next crushing season, around October 15, and to take action against black marketers, hoarders and speculators.

For consumers, the immediate focus is on whether the government's measures can improve availability and bring prices down. For the sugar industry, the key factors to watch will be the arrival of imported sugar, the release of existing stocks and the start of the next crushing season.

So, while the government has ruled out ethanol diversion as the main reason for the recent price surge, lower sugarcane production, reduced crushing activity and concerns over the release of stocks are all part of the picture.

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