An increase in sugar prices over the past few weeks has triggered speculation of a looming sugar crisis in the country. The government’s allowance for the duty-free import of 10 lakh tonnes of sugar, the first such move in the past decade, further fanned the speculation.
Amid the speculation, the government issued a clarification on Friday (21st August), saying that it is closely monitoring the situation and taking measures to curb the price hike. The government has attributed the price hike to several factors, including lower-than-expected domestic production, increased demand ahead of the festive season, weather-related damage to the sugarcane crop, tightening of sugar supplies and speculation and hoarding by some sections of the industry.
According to the government, the tightening of sugar supplies is a global phenomenon and is not limited to India. “The global sugar deficit for 2026-27 is estimated at around 33 LMT. Concerns over weather conditions have further affected the global outlook. As a result, international sugar prices have risen sharply from $474 per tonne on 30 June 2026 to $552 per tonne on 20 August 2026 — an increase of over 16% in less than two months,” the government said.
It further added that the domestic sugar production in the coming season is estimated to be lower than expected. The estimate for the upcoming crushing is expected to be around 306 LMT, compared to the initial estimate of around 343 LMT by sugarcane-growing States. The production has been affected by Red Rot and Top Borer disease in sugarcane, as well as waterlogging caused by excess rainfall.
However, despite lower estimated production, the government assured that sufficient sugar stocks are available to meet the domestic demand till the next crushing season begins in October.
Steps taken by the government to prevent hoarding
To prevent hoarding by sugar mills and traders, the government has imposed the 400-tonne dealer stock limit from 1st August to 30th November 2026. From 1st September, bulk consumers will not be permitted to hold sugar stocks exceeding 15 days of consumption.
Additionally, the Government has decided to permit duty-free import of 10 LMT of raw sugar to further augment domestic availability. Joint teams of Central and State Government officials are also carrying out physical verification of sugar stocks at mills to check hoarding and artificial scarcity.
The government has advised states and sugar mills to begin crushing from 15 October 2026. This is expected to raise October sugar production from the usual 3-4 LMT to more than 10 LMT, further improving availability during the festive season.
Ethanol production not responsible for price hike
The government refuted the allegations that the increase in sugar prices is caused by the diversion of sugar for ethanol production. Citing figures, the government said that the share of sugar diverted for ethanol production has declined from around 12% in 2022-23 to around 9% in 2025-26. It pointed out that nearly three-fourths of the ethanol produced in the country now comes from grains, particularly maize.
It further stated that India’s annual sugar production is around 320-340 LMT compared to domestic consumption of around 280-290 LMT. Since production was clearly more than consumption, in years of surplus production, excess stocks block the funds of sugar mills and can delay payments to sugarcane farmers.
According to the government, the diversion of sugar for ethanol production helped address this problem and improved the financial health of sugar mills. As a result, 97% of sugarcane dues for the 2025-26 sugar season have already been paid to farmers as of 20 August 2026. This has significantly improved the financial health of sugar mills and reduced their dependence on Government subsidy.
This is reflected in the fact that the government did not announce any subsidy since 2021-22, while ₹14,600 crore of subsidy was provided to the sugar industry between 2014 and 2021. Moreover, sugar prices for consumers also remained stable over the longer term and increased by only around 3% annually between August 2024 and July 2026.
