Sugar prices rise 15.6% in one month; Government says adequate domestic stocks are available to meet demand
New Delhi : India’s sugar industry is a major agricultural and industrial ecosystem that supports farmers, rural employment, food processing, ethanol production and international trade. India is the world’s second-largest sugarcane-producing country, with the sector supporting the livelihoods of around 50 million farmers and nearly 500,000 workers employed in sugar mills and related industries.
According to the third advance estimates released by the Ministry of Agriculture and Farmers Welfare, India’s sugarcane production is estimated to have reached around 500 million tonnes (MMT) in 2025-26, compared with 348.44 MMT in 2015-16. This represents an increase of approximately 43.5% over the last decade.
Sugarcane Cultivation Area Expands
The area under sugarcane cultivation has also increased significantly over the past decade. It rose from 49.27 lakh hectares in 2015-16 to 58.87 lakh hectares in 2025-26.
Uttar Pradesh and Maharashtra continue to remain among India’s leading sugarcane-producing states.
India has also expanded its sugar exports. Sugar exports increased from approximately 0.47 lakh metric tonnes in 2016-17 to around 8 lakh metric tonnes in 2025-26.
Major destinations for Indian sugar exports include Sri Lanka, West Asia and East Africa.
Government Fixes Sugarcane FRP at ₹365 per Quintal
For the 2026-27 sugar season, the government has fixed the Fair and Remunerative Price (FRP) of sugarcane at ₹365 per quintal, based on a basic recovery rate of 10.25%.
The FRP stood at ₹230 per quintal during the 2016-17 sugar season, when the basic recovery rate was 9.5%. Therefore, the FRP has increased by ₹135 per quintal over the past decade.
The government says the pricing mechanism is aimed at ensuring remunerative returns to sugarcane farmers while maintaining the financial sustainability of the sugar industry.
Has Ethanol Diversion Caused the Recent Sugar Price Rise?
One of the key questions surrounding the recent increase in sugar prices is whether diversion of sugar for ethanol production has reduced supplies available for domestic consumption.
Government data indicates that the share of sugar used for ethanol production has actually declined from around 12% in 2022-23 to approximately 9% in 2025-26.
Moreover, around three-fourths of India’s ethanol production now comes from grains, particularly maize, rather than sugar.
Therefore, the government has argued that the recent increase in sugar prices cannot be attributed solely to ethanol diversion.
Ethanol Programme Strengthens Sugar Mills and Supports Farmers
India typically produces around 300-340 lakh metric tonnes (LMT) of sugar annually, while domestic consumption is estimated at approximately 280-290 LMT per year.
During years of surplus production, excess sugar stocks can lock up working capital for sugar mills and contribute to delays in payments to sugarcane farmers.
Diverting a portion of surplus sugar towards ethanol production has helped address this structural issue and improve the financial position of sugar mills.
As of August 20, 2026, around 97% of the sugarcane dues for the 2025-26 sugar season had already been paid to farmers, according to the government.
The improved financial health of sugar mills has also reduced their dependence on government assistance.
Sugar Prices Jump 15.6% in One Month
While sugar prices have remained relatively stable over the longer term, the market has witnessed a sharp increase in recent weeks.
According to the government’s analysis:
- July 20, 2026: ₹48.18 per kg
- August 20, 2026: ₹55.70 per kg
- Increase in one month: Approximately 15.6%
However, the government has pointed out that between August 2024 and July 2026, retail sugar prices increased by only around 3% annually.
This suggests that the current price increase is primarily linked to short-term supply and market factors rather than a fundamental long-term shortage.
Why Are Sugar Prices Rising?
Several factors have contributed to the recent increase in sugar prices:
1. Lower-than-Expected Domestic Production
Current-season sugar production is now estimated at approximately 306 LMT, compared with the initial estimate of around 343 LMT.
The decline has been attributed to crop-related problems, including red rot and top borer diseases, as well as waterlogging caused by excessive rainfall.
2. Higher Demand Ahead of the Festival Season
Demand for sugar generally increases ahead of major festivals. With the festive season approaching, traders and consumers are expected to require larger quantities of sugar, putting additional pressure on the market.
3. Weather-Related Crop Damage
Excessive rainfall and waterlogging have affected sugarcane production in some major producing regions.
4. Global Supply Constraints
The international sugar market is also facing supply pressure. Global sugar availability for 2026-27 is estimated to be lower by approximately 3.3 million tonnes.
5. Speculation and Hoarding
The government has also observed that speculation and hoarding by some sections of the industry and trading community have contributed to the recent price rise.
Global Sugar Prices Also Rise Sharply
The recent increase is not limited to the Indian market. International sugar prices have also risen significantly.
The international price increased from approximately:
- $474 per tonne on June 30, 2026
- to $552 per tonne on August 20, 2026
This represents an increase of more than 16% in less than two months.
The global supply situation is therefore an important factor behind the recent pressure on domestic sugar prices.
Myth vs Fact: What Is Driving Sugar Prices?
| Myth | Fact |
|---|---|
| Ethanol diversion is responsible for the increase in sugar prices | The share of sugar diverted for ethanol declined from around 12% in 2022-23 to about 9% in 2025-26 |
| Ethanol production is creating a shortage of sugar for consumers | Around three-fourths of India’s ethanol now comes from grains, particularly maize |
| India is facing an outright sugar shortage | The government says adequate stocks are available to meet domestic demand until the new crushing season |
| Global sugar prices are stable | International prices increased from $474 to $552 per tonne |
| India’s sugar production is on target | Current production is estimated at around 306 LMT versus the initial estimate of 343 LMT |
| Sugar prices have been continuously rising at a very high rate | Between August 2024 and July 2026, the annual increase was only around 3% |
Government Steps to Control Hoarding and Increase Supply
The government has introduced several measures to contain the short-term increase in sugar prices and ensure adequate domestic availability.
400-Tonne Stock Limit for Sugar Dealers
A stock limit of 400 tonnes has been imposed on sugar dealers across the country from August 1 to November 30, 2026.
The move is aimed at preventing excessive stock accumulation and speculative activity.
15-Day Stock Limit for Bulk Consumers
From September 1, 2026, bulk consumers will not be permitted to hold sugar stocks exceeding their 15-day consumption requirement.
This measure is intended to prevent unnecessary accumulation of stocks in the supply chain.
Physical Verification of Sugar Stocks
Joint teams of Central and State Government officials are carrying out physical verification of sugar stocks at mills.
The exercise is intended to identify instances of hoarding, speculative stocking and artificial supply shortages.
Duty-Free Import of 1 Million Tonnes of Raw Sugar
As a precautionary measure, the government has decided to allow the duty-free import of 1 million tonnes of raw sugar.
The move is expected to increase domestic availability and provide additional supply support if required.
Early Start to the New Crushing Season
The government has advised states and sugar mills to begin sugarcane crushing from October 15, 2026.
Normally, sugar production in October is around 3-4 LMT, but with an early start to the crushing season, production is expected to rise to more than 10 LMT during the month.
The government expects this additional production to improve sugar availability during the upcoming festive season.
Sugar Industry’s Role in Ethanol Blending
The Indian sugar industry has become an important contributor to the country’s ethanol blending programme.
Blending ethanol with petrol is aimed at:
- Reducing dependence on fossil fuels
- Improving India’s energy security
- Providing an additional revenue stream for the sugar industry
- Supporting more stable income opportunities for farmers
- Reducing greenhouse gas emissions
Importantly, the government maintains that increased ethanol production does not necessarily mean reduced sugar availability for domestic consumers, particularly as a growing proportion of ethanol is now produced from grains such as maize.
Farmers Remain at the Centre of the Sugar Value Chain
The sugar industry’s value chain begins with sugarcane cultivation and extends through harvesting, transportation, crushing, sugar production, ethanol manufacturing, power generation and exports.
For farmers, timely payment of sugarcane dues remains one of the most important issues.
With 97% of the 2025-26 sugarcane dues already paid as of August 20, 2026, the government says the improved financial condition of sugar mills is helping strengthen payments to farmers.
The ethanol programme has also provided sugar mills with an alternative revenue stream, helping them manage surplus production and improve liquidity.
What Happens Next?
The new sugarcane crushing season beginning in October is expected to be a crucial turning point for the market.
Higher production from October, duty-free imports of raw sugar, stock limits and action against hoarding are expected to improve supply conditions.
At the same time, global sugar prices, weather conditions, domestic production and festive demand will remain key factors to watch.
Conclusion
India’s sugar industry has evolved from a conventional agricultural sector into a diversified ecosystem connecting farmers, sugar mills, ethanol producers, energy generation, food processing and global trade.
The recent increase in sugar prices reflects a combination of lower-than-expected production, seasonal demand, weather-related crop damage, global supply constraints and market speculation.
However, the government maintains that the country has sufficient stocks to meet domestic requirements until the new crushing season begins.
The immediate priority will be to keep consumer prices under control while ensuring timely payments to sugarcane farmers and financial stability for sugar mills.
With the government preparing additional supply measures and the new crushing season scheduled to begin in October, the coming months will be critical for determining whether the recent spike in sugar prices proves to be temporary or develops into a more sustained market trend.
Source: Press Information Bureau (PIB), Government of India, August 26, 2026.
