Sugar prices have seen a significant increase as the festive season approaches, raising concerns about the potential impact on household budgets. The government has clarified that the rising costs are not attributed to ethanol production. Official data indicates that on July 20, 2026, the price of sugar was Rs 48.18 per kg, which surged to Rs 55.70 per kg by August 20, 2026. In response to the situation, the government is closely monitoring sugar supply and has implemented measures to keep prices in check.

The Ministry of Consumer Affairs stated that it would be erroneous to attribute the price rise solely to the diversion of sugar for ethanol production. In recent years, the proportion of sugar diverted for ethanol has decreased from approximately 12 per cent in 2022-23 to about 9 per cent in 2025-26. Additionally, the majority of ethanol produced in India now comes from grains, particularly maize.

Factors contributing to the current rise in sugar prices include lower-than-expected domestic production, increased demand due to upcoming festivals, adverse weather impacting sugarcane crops, constrained global supplies, and practices of speculation and hoarding by certain industry segments.

Domestic Sugar Production Forecasts

The forecast for sugar production for the current season is approximately 306 lakh metric tonnes (LMT), falling short of the initial estimate of around 343 LMT provided by sugarcane-growing states. Production has faced setbacks due to diseases affecting sugarcane, including Red Rot and Top Borer, alongside damaging weather such as excessive rainfall and waterlogging.

Despite the anticipated lower production figures, the government has assured that there are sufficient sugar stocks to meet domestic demand until the next crushing season, which is expected to commence in October.

Globally, sugar prices are also rising, attributable to tightening supplies. Reports suggest a global sugar deficit for the 2026-27 period is expected to be around 33 LMT, compounded by weather-related production challenges. In the international market, sugar prices have increased from $474 per tonne on June 30, 2026, to $552 per tonne by August 20, representing an increase of over 16 per cent in less than two months.

Government’s Ethanol Programme Defence

The government has defended its ethanol programme, asserting its benefits for both sugar mills and farmers. Typically, India produces around 320-340 LMT of sugar annually, while domestic consumption hovers between 280-290 LMT. In years of surplus production, excess stock can tie up funds for sugar mills, delaying payments to sugarcane farmers. Diverting surplus sugar to ethanol has helped mitigate this issue and improved the financial stability of sugar mills.

As of August 20, 2026, 97 per cent of sugarcane dues for the sugar season of 2025-26 had been settled. This improvement in financial standing has diminished the reliance of sugar mills on government support. Since 2021-22, no subsidies have been announced for the sugar industry, following payouts of approximately Rs 14,600 crore between 2014 and 2021.

Consumer sugar prices have remained relatively stable in the long-term, with a modest annual increase of about 3 per cent recorded between August 2024 and July 2026.

Government Measures to Stabilise Sugar Market

The government has identified speculation and hoarding practices as contributors to the recent price increases. In an effort to counteract artificial shortages, a stock limit of 400 tonnes has been imposed on sugar dealers nationwide from August 1 to November 30, 2026. Additionally, from September 1, bulk consumers are prohibited from holding sugar stocks beyond 15 days of their consumption.

Teams from both central and state governments are inspecting sugar stocks at mills to detect potential hoarding and to prevent any artificial scarcity in the market.

To enhance domestic availability, the government has sanctioned duty-free imports of 10 LMT of raw sugar. Additionally, states and sugar mills have been advised to commence crushing by October 15, which is expected to push up production from the typical 3-4 LMT to over 10 LMT, aiming to alleviate sugar shortages during the festive season. The government remains committed to monitoring sugar stocks, prices, and market practices, and will take necessary steps to avert unwarranted price surges while ensuring timely payment of dues to farmers.

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