New Delhi: Sugar has suddenly become much more expensive in India. The average retail prices reached Rs 63.05 a kg on 24 August, up 22 percent in a week and 37 percent from a year earlier, according to data from the Department of Consumer Affairs price monitoring cell.
To cool prices and increase availability, the government on 20 August allowed duty-free imports of 10 lakh tonnes of raw sugar until October 31—the first large-scale import decision in about a decade. The duty was 100 percent.
The move to import sugar marks a sharp reversal. In November 2025, the government allowed mills to export 15 lakh tonnes, raised to 20 lakh tonnes in February 2026, expecting higher production.
But only around 8 lakh tonnes were eventually shipped, partly due to unfavourable global pricing. This came just before production fell short of expectations in March and April, as crop diseases and bad weather affected sugarcane yields in major producing states such as Uttar Pradesh and Maharashtra.
In May 2026, the government issued an order banning exports of sugar until 30 September to protect domestic availability.
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Why are sugar prices rising
The immediate reaons are lower-than-expected production, festive demand and speculative stocking. The government estimates 2025-26 sugar production (October to September) around 306 lakh metric tonnes (LMT), against an initial estimate of about 343 LMT.
Diseases such as Red Rot and Top Borer along with waterlogging from excess rainfall, have hit cane yields and recovery in key producing states.
Red Rot is a fungal disease that attacks sugarcane and causes the stalk to rot, while Top Borer is an insect pest that damages the plant’s growing tip, reducing cane growth and yield.
Niraj Shirgaokar, the president of the Indian Sugar Mills Association (ISMA), estimates net sugar production at around 279 LMT after accounting for ethanol diversion, with closing stocks of roughly 35 lakh tonnes by the end of September.
He said the price rise is not due to an actual shortage, but several factors coming together – lower output, festive buying, higher global prices and, most importantly, speculation.
“Globally, lower estimated sugar production in Brazil has tightened supplies and pushed international prices from around $ 474 a ton in June to around $ 552 a ton in August,” Shirgaokar said on Monday, addressing a press briefing in Delhi.
He said bulk buyers who normally purchase sugar as needed are now stocking one to two months in advance. This pulls sugar “out of circulation” and creates an artificial tightness in the market.
Arya Roy Bardhan, a junior fellow at the Observer Research Foundation (ORF), said the gross production is about 11 percent below predicted output because of excessive rainfall and disease.
“The unusually low stocks coupled with festive season inventory piling and speculative demand is further elevating prices,” he told ThePrint.
Bharati Balaji, a deputy director general of the All-India Distillers’ Association, also attributed much of the rise in prices to speculative buying.
She expects 35-40 lakh tonnes of closing stocks by 30 September, with fresh supplies from the new crushing season arriving by mid-to-late October.
The All-India Distillers’ Association is India’s apex body representing the ethanol, bioenergy and potable alcohol sectors across all feedstock sources.
So, is ethanol responsible
Ethanol is an important part of India’s sugar story, but the numbers do not support making it the main reason for the current price spike.
Sugarcane can be used to produce sugar or be diverted towards ethanol production. More diversion can mean less sugarcane available for sugar production.
But the government says the share of sugar diverted to ethanol has fallen from around 12 percent in 2022-23 to about 9 percent in 2025-26. Nearly three-fourths of India’s ethanol now comes from grains, particularly maize.
Agricultural economist Ashok Gulati of Indian Council for Research on International Economic Relations (ICRIER) broadly agrees that maize is a more suitable feedstock for ethanol than rice or sugarcane.
However, he said low productivity remains a key challenge, with maize yields need to rise substantially for it to become truly competitive as an ethanol feedstock.
Bardhan said ethanol diversion affects overall availability but “was not the primary trigger” for the price rise. Balaji noted around 2.7 million tonnes was diverted to ethanol last year, but this has not caused a fundamental shortage—if supply tightens further, ethanol production can shift towards maize instead.
Balaji says ethanol procurement prices (the rate at which public companies pay to distilleries) have stayed flat since 2022-23 even though sugarcane prices have risen by roughly 16 percent, and if it stays that way mills would find it economically prudent to produce sugar instead.
“At current sugar prices, mills may find it more commercially attractive to produce sugar. If the present price scenario continues, ethanol production from sugarcane juice and B-heavy molasses could become uneconomical,” Balaji said.
Government containment measures
The government’s immediate aim seems to be boosting supplies through imports before the festive season and the new crushing season gather pace.
Brazil, the largest producer of sugar in the world, is the most realistic source for the imports, but shipments can take around 40-45 days to reach Indian ports. Thailand, another traditional supplier, is also facing a supply shortfall.
This means imports will not ease prices immediately, but could help bridge the gap if they arrive before domestic production picks up.
The government is also trying to bring forward domestic supplies.
It has asked states and sugar mills to begin sugarcane crushing from 15 October, which is expected to push October sugar production above 10 lakh tonnes, compared with the usual 3-4 lakh tonnes.
At the same time, it is trying to prevent stockpiling from worsening the squeeze. A 400-tonne stock limit has been imposed on sugar dealers from 1 August to 30 November. Whereas, bulk consumers will not be allowed to hold more than 15 days of consumption from 1 September onwards. Central and state government teams are also physically checking stocks at mills.
The government is therefore relying on three measures – imports, earlier crushing and action against hoarding – to improve availability ahead of the festive season.
The current price rise is not simply a case of India running out of sugar. Lower production, tighter stocks, festive demand, higher global prices and speculative buying have all contributed to the squeeze.
(Edited by Ajeet Tiwari)