Sugar Prices Rise: Centre Says Low Output, Festive Demand Behind Spike, Not Ethanol

The Centre has said the recent surge in sugar prices is not being driven by ethanol production, attributing the increase mainly to lower domestic sugar output, stronger festive demand and supply-related pressures. The government said sugar production in the current season is expected to be around 306 lakh tonnes, below the initial estimate of 343 lakh tonnes. The lower production has tightened the supply situation at a time when demand is expected to rise ahead of the festive season.

Sugar consumption traditionally increases around festivals as demand for sweets, confectionery and other food products rises. With Ganesh Chaturthi, Dussehra and Diwali approaching, traders and buyers have also started building inventories, adding further pressure to the market. The Centre rejected the argument that ethanol diversion is responsible for the price increase. It said the share of sugar diverted for ethanol production has declined from about 12% in 2022-23 to around 9% in 2025-26. The government also pointed out that nearly three-fourths of India's ethanol production now comes from grains, particularly maize.

Retail sugar prices have nevertheless increased significantly in recent weeks. Government data showed the average retail price rising from around ₹48 per kg in July to more than ₹55 per kg in August, with prices in some markets moving even higher. Officials have cited several factors behind the increase, including lower-than-expected sugar production, weather-related crop damage, stronger domestic demand, tightening global supplies and concerns over speculative buying and hoarding.

To improve availability and contain prices, the government has moved to increase supplies in the domestic market. It has approved duty-free sugar imports and introduced tighter stockholding restrictions for bulk consumers during the upcoming festive period. The Centre is also monitoring sugar stocks held by mills and other market participants to ensure that adequate quantities remain available for domestic consumption.

The latest price movement has renewed attention on India's sugar and ethanol policies. While ethanol remains an important part of the country's fuel-blending programme and provides an additional revenue stream for sugar mills, the government maintains that it is not the main reason behind the current sugar price rise.

With domestic production lower than initially projected and festive demand expected to remain strong, sugar prices are likely to remain under close watch in the coming weeks. The impact of additional imports and government measures will determine whether supplies improve enough to ease pressure on consumers before the peak festive buying period.