Ethanol diversion not the reason behind sugar price rise, says govt

Sugar prices have risen sharply in recent weeks, but the government on Friday ruled out ethanol production as the reason for the increase, attributing the rise to lower-than-expected domestic output, festive-season demand, weather-related crop damage, tightening global supplies and speculation and hoarding.

Sugar prices have increased in recent weeks, from ₹48.18 per kg on 20 July 2026 to ₹55.70 per kg on 20 August 2026. The Government is closely monitoring the situation and has taken a series of measures to ensure adequate availability of sugar and stable prices for consumers, said Ministry of Consumer Affairs, Food & Public Distribution.

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"It is incorrect to attribute the recent increase in sugar prices to diversion of sugar for ethanol production."

"The present increase in sugar prices is due to a combination of factors, including lower-than-expected domestic production, increased demand ahead of the festive season, weather-related damage to the sugarcane crop, tightening global sugar supplies and speculation and hoarding by some sections of the industry."

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Despite the lower than estimated production, adequate sugar stocks are available in the country to meet domestic demand until the new crushing season begins in October, said the ministry. "The tightening of sugar supplies is a global phenomenon and is not limited to India."


In two months, sugar prices in the domestic market have jumped by nearly 40%. Ex-mill prices across the country, led by Maharashtra, are currently at Rs 5,400-5,560 per quintal, with S-grade at Rs 5,750 and M-grade at Rs 5,850-5,900, excluding GST, by market estimates.


Govt's rare move

Centre on Thursday allowed, for the first time in nearly a decade, the duty-free import of 1 million tonnes of raw sugar until October 31 in a bid to cool the record high prices ahead of the upcoming festive season.

This marked a sharp U-turn in the government’s sugar policy. Just nine months ago, in November 2025, the government approved 1.5 million tonnes of sugar for export, later increasing it to 2 million tonnes, amid the expectation of a bumper crop. However, even before the trade barely moved, with only 800,000 tonnes shipped, the government curbed exports as domestic stocks tightened. The policy reversal raised questions over the estimate for sugar production and stock in 2025-26.

What lies ahead?

Patchy rains and dry weather conditions have affected sugarcane output. Since the crop requires substantial water for irrigation, concerns over supply have added to upward pressure on prices.

Further, a worsening supply outlook in Brazil, the world’s largest sugar producer, has also triggered a sharp rally in sugar prices. The country has warned of a delay in the harvest due to adverse weather conditions.