Sugar At Rs 55/kg: Centre Denies Ethanol Diversion Is Behind Price Rise
Sneha | August 21, 2026 10:41 PM CST
Sugar prices have risen sharply over the past month, increasing from Rs 48.18 per kg on July 20, 2026, to Rs 55.70 per kg on August 20. The government said it is closely monitoring the situation and has taken several steps to ensure adequate supplies and stable consumer prices.
Sugar Price Rise Not Linked To Ethanol Diversion
The government said it would be incorrect to attribute the recent increase in sugar prices to the diversion of sugar for ethanol production, according to the statement by PIB.
The share of sugar diverted for ethanol has, in fact, declined from around 12% in 2022-23 to around 9% in 2025-26. Nearly three-fourths of the ethanol produced in India now comes from grains, particularly maize.
The recent rise in sugar prices has been attributed to several factors, including lower-than-expected domestic production, increased demand ahead of the festive season, weather-related damage to sugarcane crops, tightening global supplies, and speculation and hoarding by some sections of the industry.
Sugar Production Below Initial Estimate
Sugar production in the current season is expected to be around 306 LMT, significantly below the initial estimate of around 343 LMT made by sugarcane-growing states.
Production has been affected by Red Rot and Top Borer diseases in sugarcane, along with waterlogging caused by excessive rainfall.
Despite the lower-than-expected output, the government said adequate sugar stocks are available to meet domestic demand until the new crushing season begins in October.
Global Sugar Prices Also Rise
The tightening of sugar supplies is not limited to India, with global markets also facing a supply deficit.
The global sugar deficit for 2026-27 is estimated at around 33 LMT, while concerns over weather conditions have further weakened the global outlook.
International sugar prices have risen from $474 per tonne on June 30, 2026, to $552 per tonne on August 20, marking an increase of more than 16% in less than two months.
Ethanol Programme Benefits Farmers, Sugar Mills
India typically produces around 320-340 LMT of sugar annually, against domestic consumption of around 280-290 LMT.
During years of surplus production, excess stocks can block the working capital of sugar mills and delay payments to sugarcane farmers. Diverting surplus sugar towards ethanol has helped address this structural issue and improve the financial health of sugar mills.
The government said 97% of sugarcane dues for the 2025-26 sugar season had been paid to farmers as of August 20, 2026.
The stronger financial position of sugar mills has also reduced their dependence on government support. While around Rs 14,600 crore in subsidies was provided to the sugar industry between 2014 and 2021, no such subsidy has been announced since 2021-22.
At the consumer level, sugar prices have remained broadly stable over the longer term, rising by around 3% annually between August 2024 and July 2026.
Government Steps In To Check Hoarding
The government said speculation and hoarding by some sugar mills and traders have also contributed to the recent price increase. It has consequently introduced several measures to curb hoarding and increase supplies:
A 400-tonne stock limit has been imposed on sugar dealers across the country from August 1 to November 30, 2026.
From September 1, bulk consumers will not be allowed to hold sugar stocks exceeding 15 days of consumption.
Joint teams of Central and state government officials are conducting physical verification of sugar stocks at mills to check hoarding and artificial scarcity.
The government has allowed duty-free imports of 10 LMT of raw sugar as a precautionary measure to increase domestic availability.
States and sugar mills have been advised to begin crushing from October 15, 2026. This is expected to increase October sugar production from the usual 3-4 LMT to more than 10 LMT, improving availability during the festive season.
The government said it remains committed to protecting the interests of both consumers and sugarcane farmers. It will continue monitoring sugar stocks, prices and market practices and take necessary measures to prevent hoarding and unwarranted price increases while ensuring timely payment of farmers’ dues.
