Explained: Why is sugar getting costlier in India?

New Delhi: Sugar prices are rising sharply across India ahead of the festive season, with a combination of lower-than-expected domestic production, stronger seasonal demand, weather-related crop damage, global supply concerns and alleged hoarding pushing up wholesale and retail prices.

The government says the recent increase is a short-term supply and market issue rather than an outright shortage. Sugar prices rose from ₹48.18 a kg on July 20 to ₹55.70 a kg on August 20, an increase of about 15.6% in a month, according to the Ministry of Consumer Affairs, Food and Public Distribution.

Why are sugar prices rising?

The biggest factor is that India is producing less sugar than initially expected.

Sugar production for the 2025-26 season is now estimated at about 30.6 million tonnes, against an initial estimate of around 34.3 million tonnes. The government has attributed the shortfall to sugarcane diseases, including Red Rot and Top Borer, as well as waterlogging caused by excessive rainfall.

At the same time, demand is increasing as India enters its peak consumption period. The festive season beginning with Ganesh Chaturthi and continuing through Dussehra and Diwali typically drives higher demand for sugar, while food and beverage manufacturers stock up ahead of the festival and wedding seasons.

This combination – lower production and higher demand – has tightened supplies available in the market just as consumers and bulk buyers are seeking more sugar.

Did ethanol production cause the price rise?

The issue has become politically contentious, with Opposition parties and some farmer groups blaming the diversion of sugarcane towards ethanol production for the current price increase.

The government, however, rejects that explanation. It says the share of sugar diverted for ethanol has actually fallen from about 12% in 2022-23 to around 9% in 2025-26. It also points out that nearly three-fourths of India’s ethanol production now comes from grains, particularly maize.

Industry views are divided. Some experts have argued that around three million tonnes of sugar-equivalent production has gone towards ethanol this season, leaving less room for error when the sugar crop underperforms. Others say the current price surge cannot be explained by ethanol because sufficient stocks remain available.

The Indian Sugar and Bio-energy Manufacturers Association has said there is no fundamental shortage and that panic and speculative buying have played a major role in the recent rally.

Did India miscalculate its sugar production?

This is another important part of the story.

India had initially expected a much larger crop and permitted exports during the season. About 800,000 tonnes of sugar had been exported before exports were stopped in May, according to industry and government data cited in recent reports.

With production subsequently falling below expectations, the export decision has come under scrutiny.

India consumed about 28-28.5 million tonnes of sugar in the current season, while production after diversion for ethanol is considerably tighter. Opening stocks for the next season are also expected to be lower than last year.

This has left the domestic market with less of a cushion ahead of the festival season.

Weather is adding to the pressure

Sugarcane is a water-intensive crop and weather conditions have affected production in several important growing areas.

The government has cited excessive rainfall and waterlogging, while industry participants have also pointed to uneven rainfall and dry spells in key producing states such as Maharashtra and Karnataka.

The problem is not confined to India. Global sugar supplies are also tightening. The government estimates a global sugar deficit of about 3.3 million tonnes for 2026-27. International sugar prices rose from about $474 a tonne on June 30 to $552 a tonne on August 20—an increase of more than 16%.

Adverse weather in major producing countries, including Thailand and Brazil, has added to concerns about global availability.

Is hoarding making sugar more expensive?

The government believes speculation and hoarding by some sugar mills and traders have contributed to the price rise.

It has imposed a 400-tonne stock limit on sugar dealers from August 1 to November 30. From September 1, bulk consumers will also be restricted from holding stocks exceeding 15 days of consumption. Government teams are conducting physical verification of stocks at sugar mills to check for hoarding and artificial scarcity.

Industry representatives, meanwhile, have argued that panic buying and speculation have exaggerated the price increase.

Why is the government importing sugar?

To prevent the seasonal demand surge from turning into a bigger supply problem, the government has allowed duty-free imports of up to 10 lakh tonnes (1 million tonnes) of raw sugar until October 31.

This is India’s first major sugar import for domestic consumption in nearly a decade. The move is intended to add a buffer before the next crushing season begins.

Port-based refineries have also been permitted to sell some refined sugar domestically instead of exporting it, potentially adding around 300,000 tonnes to the local market.

However, the full one million tonnes may not actually be imported. Reuters reported on August 25 that mills and refiners could import only about half the permitted quantity because domestic prices have fallen sharply since the import announcement, making imports less profitable.

Will sugar prices come down?

There are signs that the pressure could ease.

The government has asked states and sugar mills to begin the next crushing season from October 15, earlier than usual. It expects this to increase October sugar production to more than 10 lakh tonnes, compared with the usual 3-4 lakh tonnes, improving availability during the festive period.

Industry officials have also said prices could cool as panic buying eases and fresh stocks enter the market.

But the outlook will depend heavily on the next sugarcane crop and weather conditions.

The bottom line

India is not necessarily facing an immediate physical shortage of sugar. The government says stocks are sufficient to meet domestic demand until the new crushing season begins.

The current price spike is instead the result of several pressures arriving at the same time: a production shortfall, festival-driven demand, lower stocks, weather damage, tighter global supplies and speculation or hoarding.

The government’s decision to import one million tonnes is therefore less about responding to empty shelves today and more about creating a buffer before demand peaks and the next domestic crop arrives.