Soaring sugar prices over recent weeks have started to hit domestic budgets, causing worries ahead of the festival season. Retail prices have gone up by about 35-40%, from Rs 48 per kg reported last month to about Rs 65. Prices have touched Rs 70-75 in some regions. Multiple factors have led to the price spike, but the most prominent among them is the Union government’s inability to foresee the production and supply crunch and to take timely corrective steps. Some important decisions may also have contributed to the situation. The country has recorded a significant fall in domestic production: output estimates for 2025-26 came down to about 306 lakh metric tonnes (LMT) from an initial projection of 343 LMT. Government estimates place the country’s sugar consumption at 280-290 LMT. While climatic factors, including waterlogging caused by excessive rainfall in key producing states such as Maharashtra, reduced cane yields, pest and fungus attacks reduced yields in another major state, Uttar Pradesh.

The government controls every stage of production, and much of the supply is organised and managed by sugar co-operatives. However, prompt measures to address the shortage were largely absent – imports in time, for instance, could have averted the current situation. High festival demand during the next few months will likely put pressure on depleting supplies, further impacting the prices. Speculation and hoarding by a section of traders may have added to the pressure. International prices also rose over 16% in recent weeks. The government has decided to import 10 LMT of raw sugar but it will take time for the stocks to materialise and reach the market. It has also imposed stock limits on dealers and bulk consumers, announced physical verification of mill inventories, halted exports, and called for early crushing.

While the diversion of cane for ethanol production has been cited as another reason for the fall in supply, the government has claimed that the share of sugar diverted for ethanol has fallen from about 12% in 2022-23 to 9% in 2025-26. It has also clarified that nearly three-fourths of the ethanol produced in the country now comes from grains, most of it from maize. However, the diversion from the current pool has had an impact. Sugar prices will need close monitoring in the coming weeks, given their potential impact on household budgets and food inflation. The prices and production scenario should push the country to devise a comprehensive policy that balances the demands of food security and fuel needs. (Source: DH)