The all-India average retail price of sugar rose from Rs 45.87 per kilogram in July 2025 to Rs 63.05 in August 2026.
Also, the price of wholesale sugar has risen from Rs 4,300-Rs 4,400 per quintal to Rs 5,800-Rs 5,900 per quintal.
Since the CPI (Consumer Price Index) weight of sugar is 1.36 percent, it won’t itself explode headline inflation, but it may subtly show effects and repercussions in other products like sweets, bakery products, beverages, cold desserts and processed foods.
The pinch will be felt even more strongly in the coming months since the festive season is around the corner.
India’s sugar demand & production
Despite being one of the largest sugar producers, India has a huge demand for sugar, 28 million tonnes annually on average. This demand is each year easily fulfilled by the production of sugar done in the country, which ranges around 34 million tonnes to 35 million tonnes.
However, this year the expected sugar production by the Indian Sugar & Bio-energy Manufacturers Association (ISMA) was 34.3 million tonnes of sugar.
Decline in production
The gross revised production in 2026 came out to be 30.6 million tonnes, which is 3.7 million tonnes less than the projected figure. This represented a 10.8 percent shortfall against the initial forecast and was caused by different factors. These factors include: excess rainfall and waterlogging. In major cane-growing regions, excessive rainfall and waterlogging can damage roots, affect sucrose formation and cane weight.
In Uttar Pradesh, the widely cultivated variety Co-0238 was particularly vulnerable to Red Rot disease. Thus, the supply to mills is reduced in Uttar Pradesh. This decline was of 6.7 percent, i.e. from 93.76 million tonnes in 2024-25 to 87.45 million tonnes in 2025-26. February heat spike, March unseasonal rain and crop rot were the major reasons for this decline. Recovery actually improved from 9.7 percent to 10.2 percent, which indicates that the problem is chiefly about cane quantity and availability, not mill efficiency.
Also, early flowering and maturing of cane contributed to this decline as a factor.
By March-end, 467 of India’s 541 mills had already stopped crushing, compared with 420 a year earlier, evidence that the supposedly abundant cane crop had exhausted much sooner than production forecasts anticipated.
Role of ethanol blending
The sugar stock left after the diversion for ethanol production has shown an increase of 7 percent, as of 30 April. After this diversion, 25.6 million tonnes of sugar were left in 2025, but this year, after this diversion, 27.9 million tonnes of sugar was left and the share of production diverted for ethanol production is nine percent which is less than 12 percent of that of year 2022-23.
Also, the ethanol industry is now not heavily dependent on the sugar industry; instead, three-fourths of ethanol production is done from grains.
Why the prices hiked now only
The sugar prices rose in the months of July-August because it is the lean window of sugar production, where the old stocks get almost utilised, and new crushing has not started, which usually begins in October, and the festive season is coming.
Since the crushing season was prematurely ended this year and existing stocks got drained, this made the realisation of the tightening in supply. Advance buying for the festive season led to a hike in demand and also created speculations of stocking.
Major angle for accountability
The difference between the forecasted and actual production is 10.8 percent. This forecast error made the government act on surplus that never materialised.
The premature closure of 467 mills at the end of March suggested less production, which is why 1.5 million tonnes of exports were permitted, although it was banned on 13 May.
More than 0.6 million tonnes had reportedly been shipped by the time exports were banned; total exports over the season reached approximately 0.8 million tonnes.
Government plan of action
Imports: The government has permitted 1 million tonnes of temporary zero-duty sugar imports valid till 31 October 2026.
Hoarding and stocking control: Sugar dealers may hold a maximum of 400 tonnes or 30 days of stock. Bulk consumers using more than ten tonnes per month may hold no more than 15 days’ consumption only, with transactions verified through GST records.
The government has banned the export of sugar from 13 May 2026 to 30 September 2026.
The government has also directed the mills to start crushing from 15th October, which is roughly 10-15 days earlier than earlier.
India’s sugar shock was not simply an act of weather. Policymakers planned exports and ethanol diversion around a projected surplus, failed to correct course when mills began closing early, and intervened only after consumers encountered record prices.
Aniket Kumar Katiyar is a student of Jamia Millia Islamia, New Delhi. Views are personal.
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