Though imported sugar is yet to hit the Indian markets, prices have started to come down following the announcement. A kg of sugar that cost ₹68 a couple of weeks ago in the Capital, has now dropped to about ₹59-60.

According to official data, sugar production during the ongoing season is set to be around 306 LMT (lakh metric tonnes), significantly lower than the initial estimate of around 343 LMT.

Increasing Domestic Consumption

Domestic consumption, however, is increasing. The figure at present is 280-290 LMT against 256 LMT a decade ago.

India’s sugarcane production has gone up by 43.5% in the last decade to 500 million tonnes in 2025-26. Yet policymakers would be worried as domestic sugar production fell short of demand.

Indian Sugar Mills Association (ISMA) President Niraj Shirgaokar noted that India does not have a sugar shortage. “Our production and stock position remain fundamentally comfortable.”

“What we are addressing today is a short-term issue of market sentiment ahead of the festive season and a set of calibrated temporary measures designed to manage that sentiment. It’s not a structural supply problem.”

 

Sugar Price Movement

The elevated prices hit the consumers and bulk buyers ahead of the festive season, which will peak around Durga Puja and Diwali. Domestic demand naturally accelerates during the August–November festival calendar due to elevated sweet and beverage consumption. 

The price had remained stable for a long time before starting to rise gradually from June onwards and peaking in August. In June, the price of sugar hovered around ₹44-45 per kg, but jumped to about ₹68 per kg in late August. It later fell to ₹59-60 per kg on 31 August.

Retail prices had soared by over 50% during a one-year period. Worried over the public backlash, policymakers decided to procure sugar from overseas to augment supplies and calm down prices.

The rapid movement in domestic sugar prices at this juncture could be attributed to supply-side contraction, seasonal demand pressures, speculation, diversion for manufacture of ethanol and even global factors.

Sugar, which is an indispensable part of Indian household budgets and a key input for the country’s food-processing and confectionery industries, makes even minor price movements significant for food inflation and political economy.

Farmers Unhappy Over Government Decision

While the decision to import sugar has helped bring down prices, it has left farmers unhappy. The knee-jerk reaction related to its trade policy has also raised question marks over the long-term vision of the government.

India is the second-largest producer of sugar in the world after Brazil, but figures nowhere in global trade despite production steadily going up.

The government took a number of steps to deal with the rising price of sugar, including import of the sweetener, imposition of stock restrictions, and a crackdown on hoarders. Anticipating the problem early, the government in May banned exports of all sugar categories till 30 September. "This sudden ban of agricultural products is harming farmers. It's not just for sugar but other crops too," an analyst told The Secretariat.

The primary structural driver behind current price pressures is a significant downward revision in domestic sugarcane output for the 2025–26 crushing season (October 2025–September 2026).

In July 2025, the ISMA projected gross national output at a surplus 349 LMT. However, as crushing progressed, state agricultural departments and industry bodies slashed forecasts. The Department of Food and Public Distribution currently estimates net sugar production at around 306 LMT, while ISMA places net production even lower at about 279 LMT.

Agro-meteorological disruptions and crop diseases combined to depress cane yields and sucrose recovery rates across key agrarian belts. Deficit rainfall during crucial growth periods in southern Maharashtra and northern Karnataka depleted reservoir levels, restricting irrigation during crop elongation stages. In Uttar Pradesh and Bihar, intense spells of excess rainfall caused localised waterlogging, triggering outbreaks of Red Rot disease and Top Borer infestation.

As a result, the end-of-season buffer stocks were estimated at 35–41 LMT, the lowest inventory cover since 2016–17, leaving minimal room to counter supply shocks ahead of the festive season. In addition, a sharp 16% rally in global raw sugar prices — which escalated from US$ 474 per tonne on June 30 to US$ 552 per tonne in August – added to domestic woes.

Ethanol Not the Reason

A major public policy debate centres on whether the government’s Ethanol Blended Petrol (E20) programme diverted critical sucrose away from the food chain.

While several analysts and opposition parties have attributed the rise in sugar prices to the diversion of sugarcane for producing ethanol, the government has denied the charge.

The ISMA also joined the government in rejecting the claim that ethanol diversion caused the price surge. Official data shows that sugar diverted for ethanol declined from 12% of production in 2022–23 to roughly 9% (30 LMT) in 2025–26. 

The ethanol programme has shifted toward grain feedstocks, which now provide up to three-quarters of total ethanol supply. Consequently, actual ethanol diversion fell short of initial multi-year targets, leaving more sucrose for table sugar than originally budgeted.

Former Planning Commission Deputy Chairman Montek Singh Ahluwalia told The Secretariat that there is nothing wrong with the ethanol blending policy of the government, but “the ethanol should be produced from waste material and not from sugarcane.”

Hoarding: An Issue

India normally produces about 320-340 LMT of sugar and consumes around 280-290 LMT, according to the government. In a normal surplus year, this leaves room for exports and a healthy carry-over stock. But when production is lower, and demand is close to output, even a moderate fall in inventory can influence market sentiment.

Ethanol should be produced from waste material and not from sugarcane

– Montek Singh Ahluwalia, former Deputy Chairman, the erstwhile Planning Commission

The market’s anxiety is centred on stocks. Physical availability, compounded by speculative sentiment, invariably accelerates market tightness.

Having known about the projected carryover stock of 34-41 LMT -- the lowest in the last nine years -- the market participants took positions accordingly. Anticipating short supplies, wholesale buyers and institutional users began doubling order sizes, creating artificial local scarcity. 

Furthermore, some liquidity-constrained mills had exhausted their monthly release quotas earlier in the year, leaving actual physical supply concentrated in fewer hands.

The Ministry of Consumer Affairs has publicly noted that speculation and bulk stocking by sections of traders and mills exacerbated price increases.

The Department of Food & Public Distribution (DFPD) is continuously monitoring sugar stocks, prices, and market trends to curb hoarding and prevent any unjustified rise in prices.

Government Action

The Centre imposed a strict 400-tonne stock holding limit on all sugar dealers nationwide from 1 August to 30 November 2026, alongside mandatory weekly inventory disclosures.  From 1 September, bulk consumers are not permitted to hold sugar stocks exceeding 15 days of consumption.

DFPD Secretary Sanjeev Chopra said that “states have been advised to take strict action against entities holding stocks beyond the prescribed limits or not disclosing their stocks on time.”

The government also opened a duty-free import window for up to 1 million tonnes of raw sugar through 31 October, bypassing the standard 100% import tariff.

The Centre has also decided to coordinate with state associations in Karnataka, Tamil Nadu, and Maharashtra to advance the 2026–27 crushing season by 10 to 15 days, aiming to bring 10 LMT of fresh sugar to market by October. 

Although in the near term, retail prices may cool somewhat because of government measures, medium-term stability hinges on monsoon performance. Early agricultural forecasts indicate potential lingering rain deficits across Maharashtra and Karnataka, which could temper sugarcane production for the upcoming 2026–27 crop cycle.