Follow Us
Two successive years of consumption exceeding production, and a delay in stopping exports despite a looming shortage have contributed to the sharp spike in sugar prices in the last one month. This forced the government to announce imports of sweetener for the first time in a decade.
The prospects for the opening stock of sugar in the 2026-27 season (October-September) have dipped to only 3.5 million tonnes (MT), the lowest in the last decade. Even a dip in the amount of sweetener diverted for ethanol production could not address the supply deficit (see chart).
The average retail price of sugar stood at Rs 64.1/kg on Friday, up 39% year-on-year and 31% month-on-month, according to the Department of Consumer Affairs’ price monitoring cell. However, across urban centres, retail prices have crossed Rs 70/kg, while a month ago they were ruling around Rs 45-Rs50/kg.
ALSO READIIP growth eases to 6.7% in July
Sugar production declined by 27% to around 28.1 MT in the 2025-26 season from 35.8 MT in 2021-22. Consumption increased marginally according to industry estimates to 28.7 MT from 27.3 MT in the last five seasons.
In the last five years, the quantity of sugar diverted towards ethanol production has seen a nearly four-fold increase from 0.8 MT in 2019-20 to around 3 MT in the 2025-26 sugar season, according to analysis by Crisil. “The resultant supply tightness, along with rising cane costs driven by higher fair and remunerative price (FRP) and state advisory price (SAP), supported a sharp increase in sugar prices,” Crisil stated.
Ruling out attributing the recent increase in sugar prices to the diversion of sugar for ethanol production, a food ministry official said that the share of sugar diverted for ethanol has declined from around 12% in 2022-23 to around 9% in 2025-26. “Moreover, nearly three-fourths of the ethanol produced in the country now comes from grains, particularly maize,” according to an official note.
The government attributed the sharp spike in sugar prices to factors including a fall in domestic production due to weather-related damages, a demand spike ahead of the festive season, high global prices and hoarding by some producers.
ALSO READRealistic estimates, fiscal discipline to mark Budget FY28
The government allowed the export of sweetener after the Indian Sugar and Bio-energy Manufacturers Association (ISMA) projected a net output (including ethanol diversion) of 34.9 MT in its first preliminary estimate released in July 2025 for the 2025-26 season (October-September). However, ISMA revised the output downward to 32.4 MT in its third estimate for the current sugar season released in February 2026, citing lesser crop yield because of adverse weather conditions.
While around 0.8 MT of sugar has been exported this current sugar season, the government banned sugar exports in May 2026 to keep domestic prices stable amid expectations of lower sugar closing inventory and a possible drop in projection. “Overestimation of initial projections led to allowing exports of sweetener,” a source said.
The ministry stated that sugar production during the 2025-26 season (October-September) is expected to be 11% less, at 30.6 million tonnes (MT), compared to the initial estimate of around 34.3 MT as output was affected by Red Rot disease and Top Borer disease in sugarcane in Uttar Pradesh and Maharashtra besides water-logging caused by excess rainfall in the key sugarcane growing states in October.
Factory prices down 20%: Govt
Ex-mill or factory gate prices of sugar have declined by 20% to Rs 5000/quintal from Rs 6200/quintal, industry and official sources told FE. However, retail sugar price corrections would take about two weeks to reflect, they said.
In Uttar Pradesh and Maharashtra, ex-mills prices have declined from Rs 6500/quintal to Rs 5300/quintal and Rs 5000/quintal respectively, industry sources said.
The food ministry also announced the introduction of a fortnightly sugar allocation system from September, replacing the existing monthly quota system. The mills would be required to sell at least 40% of the allocation in the first week and the remaining quantity in the succeeding week.
The ministry stated that sugarcane crushing for the new season (2026-27) will commence from October 15 against a usual schedule of the end of October. According to the food ministry it is expected that more than 1 MT of sugar will be produced during the month thus easing supplies.
TOPICSsupply chainThis article was first uploaded on August twenty-eight, twenty twenty-six, at thirty-four minutes past seven in the evening. © The Indian Express (P) Ltd