1 week ago
India's Sugar Stocks Surge Amid Debate Over Ethanol's Role
Sugar prices in India have gone up, and shares of sugar companies have also risen.
The government says the main reasons are smaller sugarcane harvests, festive demand and limited supplies.
It says using sugar to make ethanol for E20 petrol is not the main cause.
Opposition parties disagree and say ethanol production has reduced the sugar available for people.
Ethanol can also be made from maize, rice and damaged grains.
About one-third of the ethanol supplied for petrol blending comes from sugarcane-based materials.
To increase supplies, the government allowed duty-free imports and limited how much sugar businesses can store.
Sugar companies may benefit because higher sugar prices can make producing sugar more profitable.
Sugar-linked stocks hit 52-week highs on August 24, with some rising as much as 12% intraday.
The government attributes higher sugar prices to lower production, festive demand, global supply pressure, speculation and hoarding—not ethanol blending alone.
Sugar production is estimated at 30.6 million tonnes, below the initial forecast of 34.3 million tonnes, after crop diseases and excessive rainfall.
About 32% of ethanol supplied for petrol blending comes from sugarcane feedstocks, while roughly 68% comes from grains such as maize and surplus rice.
The government permitted duty-free imports of 1 million tonnes of raw sugar and introduced stock limits ahead of the festive season.
- Who
- The Indian government, opposition parties including the Congress and Aam Aadmi Party, sugar producers, farmers, consumers and investors.
- What
- Sugar prices are rising while sugar-linked stocks reach 52-week highs, prompting debate over whether ethanol blending is reducing sugar supplies.
- Where
- India, including its domestic sugar and petrol markets.
- When
- The stock rally occurred on Monday, August 24; stockholding measures apply from August 1 and September 1 through November 30.
- Why
- Lower sugar production, crop damage, festive demand, tighter global supplies, speculation and hoarding are cited as price pressures, while opposition parties also point to ethanol diversion.
Opposition Parties' View
Government and Industry View
Cause of the price increase
Opposition Parties' View
The Congress and Aam Aadmi Party argue that diverting sugarcane-derived products to ethanol for E20 petrol has reduced sugar availability and helped drive prices higher.
Government and Industry View
The government says it is incorrect to blame ethanol diversion for the increase, pointing instead to lower sugarcane yields, crop diseases, excessive rainfall, festive demand, global prices, speculation and hoarding.
Role of sugarcane in ethanol
Opposition Parties' View
Opposition parties emphasize that sugar and sugarcane byproducts are being used in the ethanol programme, creating a food-versus-fuel trade-off.
Government and Industry View
The government says nearly three-fourths of ethanol now comes from grains, while industry representatives say declining cane output and stockpiling are contributing more to the crisis than ethanol blending alone.
Effect of ethanol policy
Opposition Parties' View
Critics say ethanol production can make sugarcane-derived products more profitable for energy use and reduce supplies available for consumption.
Government and Industry View
The government says diverting surplus sugar to ethanol has improved sugar-mill finances and helped mills pay farmers; it reported that 97% of 2025-26 sugarcane dues had been paid by August 20.
Key facts
- Estimated sugar production
- 30.6 million tonnes, versus an initial estimate of 34.3 million tonnes
- Sugarcane-based ethanol share
- Around 32% of ethanol supplied to oil marketing companies for petrol blending
- Grain-based ethanol share
- Roughly 68%, including ethanol made from maize, surplus rice and damaged foodgrains
- Sugar diverted to ethanol
- Estimated at around 3 million tonnes this season
- Import measure
- Duty-free imports of 1 million tonnes of raw sugar permitted until October 31
- Stock limits
- Dealers face a 400-tonne limit from August 1 to November 30; bulk consumers may hold no more than 15 days of consumption from September 1
- Stock-market performance
- Several sugar-linked companies reached 52-week highs, with some shares gaining as much as 12% intraday
Sources
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