'No ethanol effect', says Centre as sugar prices jump ₹8/kg

The Centre on Friday blamed sections of the sugar industry for an “unjustified” surge in prices, rejecting suggestions that diversion of sugar for ethanol production was responsible for the recent increase. With the all-India average retail price climbing to ₹56 per kg from ₹48 on July 20, the government has asked States to crack down on hoarding, black marketing and speculation, while preparing for an early start to the sugarcane crushing season around October 15.

Food Secretary Sanjeev Chopra said the country had adequate stocks to meet domestic requirements despite sugar production falling below earlier estimates in the 2025-26 marketing year. As a precaution, the government has permitted duty-free imports of 10 lakh tonnes of raw sugar by October 31 and imposed stock limits on dealers and bulk consumers. It is also considering reducing the existing 400-tonne stock limit for dealers as part of efforts to ensure that available supplies reach the retail market.

Prices rise sharply

Sugar production during the current October-September marketing year is estimated at 306 lakh tonnes, significantly below the earlier projection of 343 lakh tonnes. The decline has been attributed primarily to pest attacks on sugarcane and waterlogging following excessive rainfall. Even so, annual domestic consumption is estimated at 280-285 lakh tonnes, and the government expects the country to end September with stocks of around 33-35 lakh tonnes.

Chopra argued that these fundamentals did not justify the speed of the recent price increase. Ex-mill prices, he said, had jumped from around ₹47-48 per kg to ₹62 per kg within seven to 10 days. He held discussions with representatives of the Indian Sugar and Bio-energy Manufacturers Association (ISMA) and the National Federation of Cooperative Sugar Factories, telling them that the sudden escalation was unacceptable.

The government has also received information that some mills may be recording sugar sales without physically releasing the corresponding quantities into the market. Chopra said instructions had therefore been issued to ensure that sugar shown as sold actually moves into retail channels. States have separately been asked to take stringent action against traders or other players found hoarding stocks or attempting to create artificial scarcity.

Ethanol link rejected

The Food Secretary strongly disputed claims that the ethanol programme had created the shortage. According to government figures, around 28 lakh tonnes of sugar have been diverted towards ethanol production during the current marketing year, compared with nearly 43 lakh tonnes in 2022-23, when diversion represented about 12 per cent of the total sugar stock.

The composition of ethanol production has also changed considerably. Only about one-fourth of ethanol is currently produced from sugar, while the remaining three-fourths comes from grains, particularly maize. Chopra said blaming ethanol diversion for the present increase in sugar prices was therefore “completely baseless”.

The government continues to view ethanol production as important for the sugar industry because it provides mills with an additional revenue stream and has helped improve their finances and ability to make timely payments to sugarcane farmers. The Centre’s position is that the current price movement reflects market behaviour rather than a structural shortage caused by the ethanol-blending programme.

Imports to bolster supply

Despite maintaining that domestic stocks are sufficient, the government has approved duty-free imports of 10 lakh tonnes of raw sugar as an additional safeguard. Refineries that had imported raw sugar under the advance authorisation scheme have also been permitted to divert those stocks to the domestic market, a step expected to immediately add another three to four lakh tonnes to availability.

The Centre is additionally counting on an early start to the crushing season to ease supply concerns. Mills are expected to begin operations around October 15, which could bring an additional 10-12 lakh tonnes of sugar into the market during October itself. Major sugar-producing States have been asked to prepare accordingly.

Stock restrictions are also being extended to large industrial users. From September 1, bulk consumers, including soft-drink and ice-cream manufacturers, will not be permitted to hold sugar exceeding 15 days of their consumption requirement. While acknowledging that the measure could inconvenience some businesses, Chopra said tighter controls had become necessary to discourage unnecessary stock accumulation.

Festive supply assured

The sharp increase in sugar prices has come ahead of the festive season, when demand traditionally rises, making availability and retail inflation particularly sensitive issues. The government, however, has ruled out any shortage and expects its latest measures to bring prices down in the coming days.

With existing stocks, imports, supplies released by refineries and fresh production expected from October, the Centre believes availability will remain comfortable through the festive period and beyond. Its immediate focus is now on ensuring that adequate stocks translate into actual market supply.

The warning to the industry is consequently clear: lower production cannot become an excuse for disproportionate price increases when sufficient sugar remains available. The government has said it will continue intervening where necessary to protect both consumers from excessive prices and farmers from measures that could undermine the financial stability of the sugar sector.