Between July 20 and August 20, 2026, sugar prices experienced a dramatic surge with the average retail price rising from ₹48.18 per kg to ₹55.70 per kg, representing an approximately 16% increase in just one month. The government subsequently implemented several measures including stock limits, tighter monitoring, and duty-free import permission, which helped bring ex-mill prices down by around 20% by August 28. This latest episode follows the government's dramatic policy reversal on August 20, announcing the import of 1 million tonnes of raw sugar after a gap of almost 10 years, just less than three months after banning sugar exports following earlier permits of 1.5 MT and 0.5 MT respectively. As reported by The Economic Times, domestic sugar prices have increased by nearly 40% in two months, while available stocks have become tighter ahead of the festive season.
The sugar sector is experiencing a significant turnaround with Maharashtra and Karnataka reporting increased cane yield and sugar production, leading to revised estimates. According to The Indian Express, millers in both states have reported increased per-hectare yield which has led them to revise their production figures by 10 to 15%. Maharashtra is expected to produce 90 lakh tonnes while Karnataka's production figure would stand at 42 lakh tonnes. Industry sources indicate that a 10% increase in Uttar Pradesh's 110 lakh tonnes production would push the country's total estimate to around 305 lakh tonnes. Bhairavnath B Thombare, CMD of Natural Sugar and Allied Industries, reported a 15% increase in per-hectare yields with per-hectare yield reaching 95 tonnes in their region. With domestic consumption at 280 lakh tonnes and a carryover stock of 50 lakh tonnes, the total excess availability of sugar stands at 75 lakh tonnes.
The sugar industry faces renewed challenges from ethanol policy volatility, with the central government banning ethanol production from sugar juice or sugar syrup in December, but rescinding the ban on December 15 and allowing diversion of 17 lakh tonnes of sugar. As reported by The Indian Express, industry sources expect a second tranche to be announced soon which would allow further diversion to 25 lakh tonnes. However, this policy reversal has significantly impacted mill finances, with mills in Maharashtra having invested ₹17,000 crore in ethanol production. Thombare emphasized that mills in Maharashtra will be meeting union minister Piyush Goyal and his secretary to ask them to reinstate the original ethanol diversion programme, stating that the financial health of mills and earnings of farmers are dependent on it. The industry has reignited its demand to reinstate the original ethanol blending programme buoyed by increased sugar availability.
Recent market data shows ex-mill sugar prices dropped by almost 30% to around ₹47 per kg on Monday, down from a peak of ₹67 per kg on August 18. As reported by Business Standard, industry officials note that prices around ₹50 per kg would be positive for sugar factories with production costs estimated at ₹42-43 per kg. However, prolonged drops below this level could harm millers' ability to pay sugarcane farmers on time for the next crop. The government has also imposed stock-holding limits on sugar dealers to discourage hoarding and speculative activity, demonstrating the usefulness of such measures as safety valves. According to The Economic Times, mills have been directed to dispatch sugar within seven days of sale to reduce the possibility of buyers accumulating large stocks.
Agriculture economist Ashok Gulati from the India Council for Research on International Economic Relations has questioned the timing of policy decisions, arguing that since the government knew sugar production was falling short of consumption as early as March, there was no reason to wait until August. The analysis reveals that India has too many policy levers and not enough integrated market intelligence, with the country often intervening after events rather than predicting them. The situation highlights the importance of having accurate and regularly updated information on sugar production, ethanol diversion, domestic consumption, exports and available stocks. Experts propose establishing a National Sugar Intelligence & Price Stabilisation System based on the FIRE index, combining satellite crop intelligence, disease surveillance, production forecasts, inventory tracking, consumption forecasts, trade data and real-time market prices to provide six months advance warning of potential shortages or surpluses.
