Sugar prices have risen sharply ahead of the festive season, but the government says ethanol production is not responsible for the increase.
WHY SUGAR PRICES ARE RISING
Government data shows that the average sugar price increased from ₹48.18 per kg on July 20 to ₹55.70 per kg on August 20, 2026.
The government attributed the rise to several factors, including:
Lower-than-expected domestic sugar production
Higher festive-season demand
Crop damage caused by disease, excessive rainfall and waterlogging
Tighter global sugar supplies
Speculation and hoarding by some industry players
The government rejected the argument that ethanol production is driving the current increase. The proportion of sugar diverted towards ethanol has actually declined from about 12% in 2022-23 to around 9% in 2025-26. Nearly 75% of India's ethanol now comes from grains, particularly maize.
DOMESTIC PRODUCTION HAS FALLEN
Sugar production for the current season is now expected to be around 306 lakh metric tonnes, significantly below the earlier estimate of 343 LMT.
Diseases such as Red Rot and Top Borer, along with excessive rainfall and waterlogging, have affected sugarcane output.
Despite the lower production forecast, the government says existing stocks are sufficient to meet domestic requirements until the next crushing season begins in October.
GLOBAL PRICES ARE ALSO UP
The pressure is not limited to India. Global sugar supplies are expected to face a deficit of around 33 LMT in 2026-27.
International sugar prices increased from $474 per tonne on June 30 to $552 per tonne on August 20, a rise of more than 16%.
WHY ETHANOL IS NOT BEING BLAMED
The government argues that ethanol production has helped stabilise the sugar industry during periods of surplus production.
India typically produces around 320-340 LMT of sugar against domestic consumption of roughly 280-290 LMT. Converting part of the surplus into ethanol helps sugar mills manage excess inventories, improve their finances and pay farmers on time.
As of August 20, around 97% of sugarcane dues for the 2025-26 season had been paid.
The government also highlighted that the sugar industry has become less dependent on subsidies. While about ₹14,600 crore was provided between 2014 and 2021, no such subsidy has been announced since 2021-22.
STEPS TO CONTROL PRICES
The government has introduced several measures to prevent artificial shortages and hoarding:
A 400-tonne stock limit for sugar dealers from August 1 to November 30.
From September 1, bulk consumers will be restricted to stocks equivalent to 15 days of consumption.
Government teams are conducting physical stock inspections at sugar mills.
10 LMT of raw sugar will be allowed to enter India through duty-free imports.
Sugar mills and states have been advised to begin crushing from October 15.
The government expects early crushing to raise October production from the usual 3-4 LMT to more than 10 LMT, improving availability during the festive period.
Overall, the government says the current price increase is mainly a result of lower domestic production, stronger seasonal demand, global supply pressures and possible hoarding, rather than the ethanol programme. It plans to continue monitoring stocks and prices to prevent artificial shortages and excessive price increases.
