5 days ago
Two Years of Supply Squeeze Drive Sugar Price Spike
Sugar became much more expensive because India had less sugar available than people wanted to buy.
This happened after production fell and consumption stayed slightly higher.
Some sugar was also used to make ethanol, although the government said this was not the main reason for the price increase.
Bad weather and crop diseases damaged sugarcane in important growing states.
Some sugar was exported after early production estimates appeared more optimistic.
Later estimates showed that production would be lower than expected.
The government has announced imports and new rules for selling sugar.
It also plans to start crushing sugarcane earlier so more sugar can reach the market.
Sugar prices rose sharply as consumption exceeded production for two consecutive years and exports continued before a projected shortage became clear.
Average retail sugar prices reached Rs 64.1 per kg, up 39% year-on-year and 31% in one month.
Production fell to about 28.1 million tonnes in 2025-26 from 35.8 million tonnes in 2021-22, while consumption rose to an estimated 28.7 million tonnes.
The government attributed the price increase to weather-related crop damage, festive demand, high global prices and alleged hoarding, while industry analysis also cited ethanol diversion and higher cane costs.
The government announced sugar imports, moved to fortnightly allocations and advanced 2026-27 crushing to October 15 to improve supplies.
- Who
- Indian sugar producers, consumers, the government, the Indian Sugar and Bio-energy Manufacturers Association and Crisil.
- What
- A sharp increase in sugar prices caused by tight supplies, lower production and policy and market factors.
- Where
- India, particularly the sugarcane-growing states of Uttar Pradesh and Maharashtra.
- When
- Prices rose sharply in the month before the report; the affected 2025-26 sugar season runs from October to September, and the next crushing season is scheduled to begin October 15.
- Why
- Production was reduced by adverse weather and crop diseases, while demand, exports, ethanol diversion, global prices and alleged hoarding added pressure to supplies.
Industry and Market Analysis
Government Explanation
Role of ethanol production
Industry and Market Analysis
Crisil said that the nearly four-fold increase in sugar diverted to ethanol, combined with higher cane costs, contributed to supply tightness and rising prices.
Government Explanation
A food ministry official rejected attributing the recent price rise to ethanol diversion, noting that its share fell from about 12% in 2022-23 to around 9% in 2025-26 and that most ethanol now comes from grains.
Exports and production estimates
Industry and Market Analysis
Industry sources said overoptimistic initial production projections led the government to permit exports before later estimates were reduced.
Government Explanation
The government allowed exports after the Indian Sugar and Bio-energy Manufacturers Association's initial estimate projected net output of 34.9 million tonnes, then banned exports in May 2026 as lower production and inventories became likely.
Main causes of the price spike
Industry and Market Analysis
Industry analysis emphasized falling output, ethanol diversion and higher fair and remunerative prices and state-advised cane prices.
Government Explanation
The government emphasized weather-related production losses, festive-season demand, high global prices and hoarding by some producers.
Key facts
- Average retail price
- Rs 64.1 per kg, according to the Department of Consumer Affairs' price monitoring cell.
- Year-on-year increase
- Retail sugar prices were up 39% from a year earlier.
- Monthly increase
- Retail sugar prices were up 31% in one month.
- 2025-26 production
- Production was reported at about 28.1 million tonnes; the food ministry separately estimated 30.6 million tonnes.
- 2025-26 consumption
- Industry estimates put consumption at about 28.7 million tonnes.
- Sugar exports
- About 0.8 million tonnes were exported during the current season before the government banned exports in May 2026.
- Factory prices
- Ex-mill prices declined 20%, from Rs 6,200 to Rs 5,000 per quintal.
- Next-season crushing
- Crushing for the 2026-27 season is scheduled to begin October 15, earlier than the usual end-of-October start.
Quotes
Crisil
A financial and economic research and ratings organisation cited for industry analysis.
“The resultant supply tightness, along with rising cane costs driven by higher fair and remunerative price (FRP) and state advisory price (SAP), supported a sharp increase in sugar prices.”
financialexpress.com
Food ministry official
An unnamed official from India’s food ministry commenting on ethanol production and sugar diversion.
“Moreover, nearly three-fourths of the ethanol produced in the country now comes from grains, particularly maize”
financialexpress.com
Sources
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