Blitz India Business
NEW DELHI: India has witnessed a dramatic increase in sugar prices over the past month. Amid uproar that the increasing cost during festival time was due to the Modi Government’s E20 (ethanol) push, the Centre broke its silence recently. In a statement on August 21, the Ministry of Consumer Affairs, Food & Public Distribution rejected the claim that the increase was linked to the diversion of sugar for ethanol production, according to a Wio News report.
The Government attributed the increase to several factors, including lower-than-expected domestic sugar production, stronger demand ahead of the festive season, weather-related crop damage, tighter global supplies and speculation or hoarding by some sections of the industry.
The Ministry said a combination of domestic and global factors was behind the recent rise, while stressing that sufficient stocks are available to meet demand until the next crushing season.
Notably, retail sugar prices rose from Rs 48.18 per kg on July 20 to Rs 55.70 per kg on August 20, according to the ministry.
Now, the Government has introduced measures to curb hoarding.
Why are the prices going up?
The Government attributed the increase to several factors, including lower-than-expected domestic sugar production, stronger demand ahead of the festive season, weather-related crop damage, tighter global supplies and speculation or hoarding by some sections of the industry.
India’s sugar production for the current season is estimated at 306 lakh metric tonnes (LMT), down from an initial projection of 343 LMT. The ministry attributed the shortfall to crop problems, including Red Rot, Top Borer disease, and waterlogging caused by excessive rainfall.
Is ethanol the reason for price rise?
The Government says no. “It is incorrect to attribute the recent increase in sugar prices to the diversion of sugar for ethanol production,” the ministry said.
It pointed out that the share of sugar diverted towards ethanol production has actually declined, from around 12 per cent in 2022-23 to around 9 per cent in 2025-26.
At the same time, nearly three-fourths of India’s ethanol production now comes from grains, particularly maize, it said.
The ministry also argued that the ethanol policy has improved the financial position of sugar mills, helping them clear payments to farmers. By August 20, mills had cleared 97 per cent of cane dues for the 2025-26 season, according to the Government.
Global shortage to blame
India’s domestic market is also being affected by international trends. The Government estimates a 33 LMT global sugar deficit for 2026-27, with adverse weather affecting production in major markets.
Global sugar prices rose from $474 per tonne on June 30 to $552 per tonne on August 20, an increase of more than 16 per cent in less than two months.
The Centre has introduced several measures to prevent further price escalation and ensure supplies during the festive season.
A 400-tonne stock limit for dealers will remain in place until November 30, while bulk consumers started facing a 15-day holding limit from September 1. Central and state teams are also conducting physical stock checks at sugar mills to detect hoarding and artificial scarcity.
The Government has additionally allowed duty-free imports of 10 LMT of raw sugar. Sugar mills have also been advised to begin crushing earlier, from October 15. The ministry expects this could push October production above 10 LMT, compared with the usual 3-4 LMT.
The Centre said it would continue monitoring sugar stocks and market practices while balancing the interests of consumers and sugarcane farmers.
Demand versus supply
India’s sugar demand typically rises from August to November when it holds major festivals such as Ganesh Chaturthi, Dussehra and Diwali, when consumption of traditional sweets and confectionery increases.
India has a handful of port-based sugar refineries that are allowed to import raw sugar duty-free on the condition that they export an equivalent volume of refined sugar.
The Government could ask these refineries to divert some of their stocks to the domestic market, potentially releasing about 300,000 tonne of sugar locally, said a New Delhi-based dealer who also spoke on condition of anonymity.
A senior trader said the Government should have responded when sugar production began declining in January rather than waiting until the end of the season. The trader said bullish sentiment could persist until imported sugar physically reaches the domestic market.
The Indian Sugar & Bio-Energy Manufacturers Association (ISMA) estimates domestic consumption at 285 lakh tonne and production at 279 lakh tonne in 2025-26, excluding around 30 lakh tonne diverted towards ethanol. Closing stock as of September 30 is estimated at nearly 36 lakh tonne, compared with close to 80 lakh tonne on July 31.
