Why Sugar Prices Surged in India and What Is Bringing Them Down

Sugar prices in India climbed sharply through August before beginning to ease following government intervention, though retail rates remain elevated ahead of the festival season.

NEW DELHI — The average all-India retail price stood at ₹63.05 per kg on August 24, according to the Ministry of Consumer Affairs, up from ₹48.18 per kg on July 20. Ex-mill rates had touched a record ₹67 per kg last week, while NCDEX data showed spot prices hitting a 16-year high of ₹5,530 per quintal on August 19.

Production Shortfalls and Crop Damage

Government officials attribute the tightness to sugar production falling to 306 lakh tonnes for the 2025-26 season, down from an earlier estimate of 343 lakh tonnes, against annual domestic demand of roughly 280-285 lakh tonnes. Food Minister Pralhad Joshi cited red rot disease and El Niño weather conditions for the production shortfall. Industry reports point to excess rainfall and waterlogging in cane-growing states such as Maharashtra and Karnataka as additional factors affecting the crop and recovery rates.

Demand typically rises between August and November as households and sweet-makers prepare for Ganesh Chaturthi, Dussehra and Diwali, adding pressure on already tighter supplies. Earlier in the season, the government had permitted sugar exports of up to 2 million tonnes based on stronger production expectations, of which around 800,000 tonnes were shipped before an export ban was imposed in May as domestic stocks tightened.

The Ethanol Diversion Debate and Speculative Buying

The role of ethanol diversion has become contentious. Opposition leaders have questioned whether diversion of sugarcane for ethanol blending contributed to the shortage. The government has rejected that explanation, stating that the share of sugarcane diverted to ethanol fell from about 12 percent in 2022-23 to roughly 9 percent in 2025-26, with nearly three-quarters of ethanol now produced from grains such as maize rather than cane.

Food Secretary Sanjeev Chopra instead said mills had been "jacking up" rates despite adequate stock, calling the spike disconnected from market fundamentals. Industry body Indian Sugar Mills Association (ISMA) similarly described the rise as driven by panic and speculative buying rather than an actual shortage, and has urged tighter stockholding limits on traders to release more sugar to retail markets.

Government Action: Stock Limits and Duty-Free Imports

To curb hoarding, the government has capped dealer stockholding at 400 tonnes from August 1 through November 30, and from September 1 will limit bulk consumers using more than 10 tonnes a month to holding no more than 15 days of stock.

On August 20, the government allowed duty-free imports of up to 1 million tonnes of raw sugar under a tariff rate quota through October 31, the first such move in nearly a decade, against a standard import duty of 100 percent. It later revised the terms to remove the October 31 processing deadline, giving importers more time to refine and sell the sugar.

Price Outlook and Global Constraints

Chopra said ex-mill prices have since fallen 18 percent to around ₹55 per kg and are expected to decline further. Reuters reported that mills and refiners are now likely to import only about half the permitted quota, since falling domestic prices have reduced the profitability of imports. However, wholesale and retail prices had not fully reflected this decline as of August 24, with wholesale still at ₹58.29 per kg and retail at ₹63.05 per kg.

Global sugar prices, which rose from $474 a tonne on June 30 to $552 a tonne on August 20 amid a projected worldwide deficit, may limit how much further import supplies can ease pressure on Indian prices. In the coming weeks, consumers are likely to watch whether ex-mill declines pass through to retail shelves, how much of the import quota is actually utilised, and whether an early start to the crushing season in October brings fresh supply into the market.