India's lower sugar quota allocations have failed to tame rising retail prices, with domestic sales quotas 7% lower than actual mill dispatches between October 2025 and May 2026. According to industry sources, monthly quotas consistently matching or kept below year-ago levels despite rising consumer demand have created restricted market availability, steadily driving up prices. The Food Ministry has approved 245.5 lakh tonnes until August 2026 for the current sugar season that began October 2025, with total domestic sales allocation projected at 269 lakh tonnes if September quota remains at 23.5 lakh tonnes. This represents a 2.4% reduction from 275.5 lakh tonnes in the 2024-25 season, even as actual consumption could reach 288-290 lakh tonnes.
Sugar production during the current season is expected to be around 306 LMT, compared to the initial estimate of around 343 LMT, with production affected by Red Rot and Top Borer disease, and waterlogging caused by excess rainfall. Despite the lower-than-estimated production, the government confirmed that adequate sugar stocks are available in the country to meet domestic demand. The association has also attributed rising prices to speculative buying by traders and bulk consumers, as well as lower production resulting from adverse weather conditions. The all-India average retail price of sugar was ₹63.05 per kg on Monday, which is 29% higher than ₹48.73 per kg a month ago, with the maximum retail price at ₹75 per kg.
The government highlighted that the global sugar deficit for 2026-27 is estimated at around 33 lakh MT, contributing to international price pressures. International sugar prices have risen sharply from $474/tonnes on June 30, 2026 to $552/tonnes on August 20, 2026, marking an increase of over 16% in less than two months. This international supply constraint has created additional pressure on domestic sugar markets, with the tightening of sugar supplies being a global phenomenon and not limited just to India. The government noted that tighter global supplies have contributed significantly to the current market conditions.
The government refuted claims that diversion of sugar for ethanol production was leading to price rises, stating that the share of sugar diverted for ethanol production has declined from around 12% in 2022-23 to around 9% in 2025-26. Nearly three-fourths of the ethanol produced in the country now comes from grains, particularly maize, with only 290 crore litres out of a total 1,200 crore litre of ethanol coming from sugar during the current ethanol supply year (October 2025-September 2026). The government emphasized that the ethanol programme has helped sugarcane farmers and strengthened sugar mills, with the area under sugarcane cultivation increasing from 49.27 lakh hectares in 2015-16 to 58.87 lakh hectares in 2025-26. As of August 2026, 97% of sugarcane dues for the 2025-26 sugar season have already been paid to farmers.
Wholesale sugar prices have shown volatility, ranging from ₹5,004.59 per quintal on August 19 to ₹6,036 on August 26, with the all-India average wholesale price at ₹6,036 per quintal on August 26. According to ISMA, domestic consumption in 2025-26 is estimated at 285 lakh tonnes and production at 279 lakh tonnes (excluding about 30 lakh tonnes diverted towards ethanol). The government expects that the new crushing season will begin in October, with production projected at around 1 to 1.2 million tonnes, even though millers admitted that historically, sugar production in October has not exceeded 0.5 million tonnes. The government has expressed hope for "rationalisation" of retail prices and is hopeful of a reduction in the coming days following multiple government steps to address market pressures.
