The Centre rejects an ethanol link to rising sugar prices, citing lower domestic output, festive demand, tighter global supplies and hoarding
The government has rejected claims that the recent rise in sugar prices is linked to diversion of sugar towards ethanol production, attributing the increase to lower domestic output, stronger festive-season demand, tighter global supplies and alleged hoarding.
The Ministry of Consumer Affairs, Food & Public Distribution said on Friday that it had taken measures to improve domestic availability and contain prices, including imposing stock limits on traders and allowing duty-free imports of raw sugar.
“It is incorrect to attribute the recent increase in sugar prices to the diversion of sugar for ethanol production,” the ministry said.
The government said the share of sugar diverted for ethanol production had fallen to around 9 per cent in the 2025-26 season from about 12 per cent in 2022-23. Nearly three-fourths of India’s ethanol production now comes from grains, particularly maize, it added.
Prices Rise Before Festive Season
Retail sugar prices rose to Rs 55.70 per kg on 20 August from Rs 48.18 per kg a month earlier.
The ministry attributed the increase to lower-than-expected domestic sugar production, higher demand ahead of the festive season, crop damage caused by weather and disease, tighter global supplies, and speculation and hoarding by some industry participants.
The government has imposed a nationwide stock limit of 400 tonnes on sugar dealers until 30 November. From 1 September, bulk consumers will also be barred from holding sugar stocks equivalent to more than 15 days of their consumption.
The Centre has also approved duty-free imports of 1 million tonnes of raw sugar. Joint teams of central and state government officials have been tasked with physically verifying stocks held by sugar mills to identify possible hoarding and artificial shortages.
Production Falls Below Estimate
Sugar production for the current season is now estimated at around 30.6 million tonnes, below the initial estimate of about 34.3 million tonnes provided by sugarcane-growing states, according to the ministry.
The shortfall has been attributed to Red Rot and Top Borer diseases affecting sugarcane crops, along with waterlogging caused by excessive rainfall.
Despite the lower production estimate, the government said available sugar stocks were sufficient to meet domestic demand until the next crushing season begins in October.
It has advised state governments and sugar mills to start crushing operations from 15 October, which is expected to increase supplies during the festive period. Sugar production in October is projected to exceed 1 million tonnes, compared with the usual monthly output of around 300,000-400,000 tonnes, the government said.
Global Supplies Add Pressure
The domestic price increase comes amid tighter conditions in the global sugar market.
The government estimates a global sugar deficit of around 3.3 million tonnes in 2026-27. International sugar prices have increased by more than 16 per cent, reaching $552 per tonne on 20 August from $474 per tonne on 30 June.
The ministry said the rise in international prices had added to pressure on the domestic market.
Government Defends Ethanol Policy
The government has also defended the ethanol programme, saying it has helped the sugar industry manage structural surpluses, improve the financial position of mills and support payments to sugarcane farmers.
India generally produces around 32-34 million tonnes of sugar annually, while domestic consumption is around 28-29 million tonnes. Surplus production can result in large inventories, tie up working capital at mills and contribute to delays in payments to farmers.
The ministry said 97 per cent of sugarcane dues for the 2025-26 season had been cleared as of 20 August.
It added that the financial position of the sugar industry had improved over the years, reducing its dependence on government support. The sector received around Rs 14,600 crore in subsidies between 2014 and 2021, while no similar subsidy has been announced since 2021-22.
The government said its latest measures are aimed at maintaining adequate domestic sugar supplies and limiting further price pressure as demand rises during the festive season.
