3 days ago
India’s Sugar Prices Rise as Ethanol Policy Strains Food Security
Sugar has become much more expensive in India in a short time.
There is less sugar stored than there was last year.
Sugar production has also been damaged and may be lower than the government currently expects.
Some sugar was used to make ethanol, a fuel mixed with petrol.
This means less sugar was available for people to buy.
Demand may rise during the upcoming festival season, before new sugarcane supplies arrive.
The authors want India to import more sugar and temporarily use less sugar to make ethanol.
They also suggest using rice or maize carefully and reviewing the country’s fuel policy so food remains the higher priority.
India’s modal retail sugar price rose from about Rs 45/kg on July 24 to Rs 65/kg on August 24.
Opening stocks fell to 5 MT from 8 MT a year earlier, limiting the buffer against supply disruptions.
The government cut its 2025-26 production estimate from 34.3 MT to 30.6 MT, while the authors forecast 28-29 MT.
About 2.75 MT of sugar was diverted to ethanol as blending reached 20% in 2025-26.
The authors recommend larger sugar imports, less sugar-based ethanol and a review of the blending programme.
- Who
- Indian consumers, sugar producers, traders, millers and the government are affected; the analysis was written by Ashok Gulati and Tanmoy Adhikari of ICRIER.
- What
- Sugar prices have risen sharply as supplies tighten, prompting calls to increase imports and recalibrate the ethanol programme.
- Where
- India.
- When
- Prices rose between July 24 and August 24; the supply pressure is occurring before the 2025-26 festive season.
- Why
- Lower opening stocks, reduced production, sugar diverted to ethanol and expected festival demand have tightened supplies before fresh cane arrives in significant quantities.
Government Response
Authors’ Assessment
Cause of the price spike
Government Response
The government has blamed traders and millers for hoarding and threatened strict action.
Authors’ Assessment
The authors say speculation may have worsened the increase, but the main problem is a genuine tightening of supplies.
Sugar imports
Government Response
The government has allowed 1 MT of duty-free raw sugar imports as an initial response.
Authors’ Assessment
The authors consider this insufficient and recommend importing 3-4 MT of refined sugar while reducing the 100% refined-sugar import duty to zero or 5%.
Ethanol policy
Government Response
The existing programme has rapidly increased ethanol blending to 20% in 2025-26 using feedstocks including sugar, rice and maize.
Authors’ Assessment
The authors advocate temporarily reducing sugar-based ethanol, considering imported ethanol or lower blending, and giving oil marketing companies more flexibility over feedstocks.
Key facts
- Price increase
- The all-India modal retail sugar price rose from around Rs 45/kg on July 24 to about Rs 65/kg on August 24, an increase of nearly 44%.
- Opening stocks
- Opening stocks were about 5 MT, compared with 8 MT the previous year.
- Production estimates
- The government revised its 2025-26 sugar production estimate from about 34.3 MT to 30.6 MT.
- Authors’ forecast
- The authors expect production could be revised further down to 28-29 MT.
- Sugar diverted to ethanol
- About 2.75 MT of sugar was diverted for ethanol production.
- Import response
- The government allowed 1 MT of duty-free raw sugar imports; the authors recommend importing 3-4 MT of refined sugar.
- Ethanol blending
- Blending rose from about 5% in 2019-20 to 20% in 2025-26.
Sources
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