Sugar prices have been climbing just as the festive season approaches, raising concerns about whether the increase could put pressure on household budgets. The government, however, says ethanol production is not behind the latest price rise.
According to government data, the price of sugar increased 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 keep prices under control.
The Ministry of Consumer Affairs said it would be incorrect to blame the recent rise in sugar prices on the diversion of sugar for ethanol production.
In fact, the share of sugar diverted for ethanol has fallen from around 12% in 2022-23 to about 9% in 2025-26. Nearly three-fourths of the ethanol produced in India now comes from grains, particularly maize.
The government said the current rise in sugar prices is the result of several factors. These include lower-than-expected domestic sugar production, higher demand ahead of the festive season, damage to sugarcane crops due to weather conditions, tighter global supplies, and speculation and hoarding by some sections of the industry.
Sugar production during the current season is expected to be around 306 lakh metric tonnes (LMT), well below the initial estimate of around 343 LMT made by sugarcane-growing states.
Production has been affected by diseases such as Red Rot and Top Borer in sugarcane. Excess rainfall and waterlogging have also damaged crops in some areas.
Despite the lower production estimate, the government said the country has enough sugar stocks to meet domestic demand until the next crushing season begins in October.
The rise in sugar prices is not limited to India. Global supplies are also tightening.
The global sugar deficit for 2026-27 is estimated at around 33 LMT, while concerns over weather conditions have further affected the outlook for production.
International sugar prices have risen from $474 per tonne on June 30, 2026, to $552 per tonne on August 20, an increase of more than 16% in less than two months.
The government has defended its ethanol programme, saying it has helped both sugar mills and farmers.
India normally produces around 320-340 LMT of sugar every year, while domestic consumption is around 280-290 LMT. During years of surplus production, excess sugar stocks can block the funds of sugar mills and delay payments to sugarcane farmers.
Diverting some surplus sugar towards ethanol has helped address this problem and improved the financial position of sugar mills.
The government said the impact can be seen in farmer payments. As of August 20, 97% of sugarcane dues for the 2025-26 sugar season had already been paid.
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.
The government also said sugar prices for consumers have remained broadly stable over the longer term, rising by around 3% annually between August 2024 and July 2026.
The government has also pointed to speculation and hoarding by some sugar mills and traders as factors behind the recent price rise.
To prevent artificial shortages, a stock limit of 400 tonnes 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 their consumption.
Central and state government teams are also physically checking sugar stocks at mills to identify possible hoarding and artificial scarcity.
To increase domestic availability, the government has decided to allow duty-free imports of 10 LMT of raw sugar.
States and sugar mills have also been advised to begin crushing from October 15. The government expects this to increase sugar production in October from the usual 3-4 LMT to more than 10 LMT.
This, it said, should improve sugar availability during the festive season.
The government said it will continue to monitor sugar stocks, prices and market practices, while taking steps to prevent hoarding and unwarranted price increases and ensure timely payment of sugarcane dues to farmers.