Sugar Price Hike Linked To Lower Output, Not Ethanol Production: Centre

The Centre on Friday rejected claims that the recent hike in sugar prices was driven by diversions of sugar for ethanol production, saying the increase instead was due to lower-than-expected domestic output, rising festive-season demand, crop damage and hoarding.

Sugar prices have risen from Rs 48.18 per kg on July 20 to Rs 55.70 per kg on August 20. To curb further increase and ensure adequate availability, the government has imposed stock limits on dealers, approved duty-free imports of raw sugar and ordered checks on sugar inventories held by mills.

The Ministry of Consumer Affairs, Food and Public Distribution said it was "incorrect" to link the price rise to ethanol production.

According to the ministry, the share of sugar diverted for ethanol has fallen to around 9 per cent in the 2025-26 sugar season from about 12 per cent in 2022-23. It also said nearly three-fourths of the country's ethanol production now comes from grains, particularly maize.

The government said a combination of factors had pushed up sugar prices, including lower domestic production, increased demand ahead of the festive season, weather-related damage to sugarcane crops, tightening global supplies and hoarding by some industry participants.

Production Falls Short Of Estimates

Sugar production during the current season is expected to be around 306 lakh metric tonnes (LMT), significantly lower than the initial estimate of 343 LMT by sugarcane-growing states.

The shortfall has been linked to Red Rot and Top Borer diseases in affecting sugarcane crops, as well as waterlogging caused by excessive rainfall.st

Despite the lower output, the government said existing stocks are sufficient to meet domestic demand until the new crushing season begins in October.

Global Prices Also Rising

The Centre said the pressure on sugar prices is not unique to India, pointing to tightening global supplies.

According to government estimates, the global sugar market is likely to face a deficit of around 33 LMT in 2026-27. International sugar prices have also climbed sharply, rising from $474 per tonne on June 30 to $552 per tonne on August 20 - an increase of over 16 per cent.

Steps To Curb Prices

As part of efforts to stablise prices, the government has imposed a stock limit of 400 tonnes on sugar dealers across the country until November 30.

From September 1, bulk consumers will not be permitted to hold sugar stocks exceeding 15 days of consumption.

Joint teams of central and state government officials are also conducting physical verification of sugar stocks at mills to check hoarding and prevent artificial scarcity.

In addition, the Centre has approved duty-free import of 10 LMT (1 million tonnes) of raw sugar to boost domestic supplies.

States and sugar mills have also been advised to begin the crushing season from October 15. The government expects sugar production in October to exceed 10 LMT, compared to the usual 3-5 LMT, helping improving availability during the festive season.

'Ethanol Programme Benefits Farmers'

Defending the ethanol-blending programme, the government said it has helped address long-standing issues of excess sugar stocks and improved the financial health of sugar mills.

India typically produces 320-340 LMT of sugar annually, against domestic consumption of around 280-290 LMT. Excess stocks often lock up working capital and delay payments to sugarcane farmers.

The government said 97 per cent of sugarcane dues for the 2025-26 season have already been paid to farmers as of August 20.

It also noted that the industry's improved financial position had reduced its dependence on government support. While sugar mills received around Rs 14,600 crore of subsidies between 2014 and 2021, no such subsidy has been announced since 2021-22.

At the same time, sugar prices for consumers have remained broadly stable over the longer term, increasing by only around 3% annually between August 2024 and July 2026.

The government said it would continue monitoring sugar stocks, prices and market practices closely and take necessary measures to prevent hoarding and unwarranted price increases while ensuring timely payment of dues to farmers.