'The ethanol blended with petrol programme should not be halted or reconsidered.'
'India is not experiencing a structural sugar shortage, and the ethanol blending roadmap does not compete with food security or drive domestic price increases.'
Key Points
- 'The underlying supply situation does not currently indicate a structural shortage of sugar.'
- 'There is no structural risk of exports creating domestic scarcity.'
- 'The ethanol programme has not reduced the sugar available for domestic consumption at all.'
Sugar has suddenly become more expensive, and for the common consumer, the question is simple: Why are we paying more for something that is used in almost every Indian household?
Prices have risen in recent weeks even as the government and the sugar industry say there is enough sugar in the country and no shortage is expected.
So, is this price rise really because of less sugar, or are other factors at play?
Has the weak and erratic monsoon damaged sugarcane crops?
And has the government's push for ethanol blending taken away sugar that could otherwise have reached the market?
The timing is also important. With the festive season approaching, demand for sugar is expected to increase as households, sweet shops and food businesses stock up.
At the same time, the government has imposed stock limits on traders and bulk consumers to prevent excessive hoarding and ensure that sugar remains available in the market.
For consumers, the bigger concern is what happens next.
Will sugar prices come down in the weeks ahead, or should households prepare for higher prices through the festive season?
And with the next sugarcane crushing season approaching, will fresh supplies help bring some relief to consumers? T
To understand what is really driving sugar prices, how the monsoon has affected sugarcane production, and what consumers can expect in the coming months, Syed Firdaus Ashraf/Rediff spoke to Deepak Ballani, director general, Indian Sugar and Bio-energy Manufacturers Association, ISMA.
The first of a two-part interview:
Sugar prices have risen sharply in recent weeks. What, according to you, is the single biggest reason behind the sudden increase, and how much further could retail prices rise?
Recent upward rise in domestic sugar prices reflects a confluence of seasonal demand, agricultural variations, speculative inventory management, and evolving international trade dynamics.
Domestic production for the current season has adjusted to approximately 309 lakh tonnes due to lower sugarcane yields and reduced recovery rates.
In Maharashtra, excessive rainfall, prolonged cloud cover, and erratic temperatures impaired vegetative growth and caused premature flowering, compounded by an 18% to 20% higher crushing pace.
In Uttar Pradesh, output was constrained by suboptimal ratoon crop performance and transitional varietal shifts following red rot infestations in the Co 0238 cane variety.
Seasonal Consumption Pressures: Procurement has accelerated across household and commercial segments in anticipation of peak festive season requirements.
Market Behaviour & Inventory Management: Unfounded market speculation regarding near-term availability prompted abnormal inventory buildup.
In response, the government has recalibrated and enforced statutory stockholding limits on traders and bulk consumers to stabilise physical availability.
Global Market Headwinds: International sugar values strengthened from $474 per tonne (late June 2026) to $552 per tonne (late August 2026).
This external benchmark is supported by Brazil's increased allocation of sugarcane toward ethanol production over crystal sugar for the 2026-2027 cycle.
What is India's annual domestic sugar consumption requirement, and how much sugar has India produced in the current sugar season? Is the present production sufficient to meet domestic demand?
India does not face a structural deficit in sugar.
The underlying supply-demand balance remains fundamentally sound, with recent price movements reflecting short-term market sentiment and speculative holding rather than an actual physical shortage.
Ensuring Sufficient Sugar Supply
Sufficient Net Output: Following sucrose diversion toward the Ethanol Blended with Petrol (EBP) programme (30 lakh tonnes), India's net domestic sugar production for the 2025-2026 season is estimated at approximately 279 lakh tonnes.
This comfortably services the annual domestic consumption requirement of around 280 to 285 lakh tonnes.
Comfortable Reserve Buffer: A projected end-of-season closing stock of around 35 lakh tonnes provides a healthy carryover cushion.
Along with ongoing special crushing in Tamil Nadu and Karnataka, an early 10 to 15-day advancement of the 2026-2027 crushing season (10 lakh tonnes output in October), and a precautionary 10 lakh tonne duty-free raw sugar import window, consumer availability is fully secured heading into the peak festive demand window.
Market Sentiment vs Structural Shortage: Recent upward price firmness was driven by concentrated advance procurement by bulk buyers (stocking 1.5 to 2 months ahead instead of standard just-in-time buying) and trader-level speculation.
This created temporary visible tightness in the open market rather than a structural failure in supply.
How much sugar is currently available in stocks with sugar mills, traders and government agencies? Are the present stock levels comfortable or are we heading towards a supply shortage?
On sugar supply, the overall balance remains comfortable.
Net sugar production for 2025 to 2026 is estimated at around 279 lakh tonnes, which is expected to be sufficient to meet normative domestic consumption and leave a healthy closing stock of around 35 lakh tonnes.
The government has also permitted imports of up to 10 lakh tonnes as a precautionary measure, which could further strengthen the availability position if required and could provide the cushion to the buffer stock.
Therefore, while market sentiment may be reflecting some near-term concerns, the underlying supply situation does not currently indicate a structural shortage.
The stock position remains adequate to meet domestic requirements, subject to normal market and policy developments.
The government has permitted sugar exports from the 2025-2026 season. It later banned exports in May 2026 till September 30, 2026. Have exports contributed in any way to the present tightness in domestic supplies? Should exports be restricted if domestic prices continue to rise?
Current market conditions and transient price movements are not being driven by export outflows.
The government and industry operate under a well-calibrated, disciplined policy hierarchy that consistently places domestic food security first, the Ethanol Blended with Petrol (EBP) programme second, and export allocations last.
Under this framework, outbound shipments are evaluated strictly against domestic demand projections and carryover stock requirements, ensuring that no export commitments compromise domestic consumer needs.
The existing policy mechanism has proven to be highly responsive and robust in balancing the tripartite interests of consumers, cane farmers, and sugar mills.
Decisions regarding export calibration -- including the timely pause on shipments through September 30, 2026 -- demonstrate that the regulatory framework dynamically adjusts to safeguard domestic price stability and ensure sufficient buffer reserves ahead of high-demand periods like the festive season.
Because export volumes are continually harmonised with physical availability and national priorities, there is no structural risk of exports creating domestic scarcity.
The current demand-first strategy provides an effective, self-correcting mechanism that maintains market equilibrium without necessitating sudden or disruptive policy shifts.
The government has been promoting ethanol blending in petrol. Has the diversion of ethanol reduced the quantity of sugar available for the domestic market? If so, approximately how much sugar has been diverted?
There is no sugar shortage in the country, and the ethanol blending programme has not contributed to the current increase in prices.
The design of the programme is important to understand. The quantity of sugar diverted to ethanol is fixed at the beginning of each season only after assessment of domestic consumption needs and a comfortable buffer have been fully provided for.
Domestic consumption always comes first. Ethanol diversion is the mechanism by which surplus sugar, which would otherwise depress prices and strain mill finances, is put to productive use.
The programme has delivered very substantial benefits to the country.
It has given mills a stable, assured source of revenue alongside sugar sales, which is the single largest reason cane payments to farmers are now made on time and cane arrears are at historic lows.
It has supported rural incomes, reduced the crude import bill by thousands of crores, and contributed directly to our energy security and emissions goals.
It is a robust programme, and it will continue.
The current price increase has a different cause altogether.
With availability intact, the spike reflects market behaviour -- speculation and advance buying ahead of the festive season -- and it is that behaviour which the government's measures are designed to correct.
Also, the ethanol programme has not reduced the sugar available for domestic consumption at all, because the diversion is carried out only from the surplus over and above domestic requirement.
In other words, the sugar that went to ethanol was sugar the domestic market did not need.
About 30 lakh tonnes of sugar has been diverted to ethanol in the current season out of around 309 lakh tonnes of available sugar, thereby leaving sufficient sugar to cater domestic consumption of around 280 to 285 lakh tonnes.
Had it not been diverted, it would have sat in mill godowns as unsold surplus, depressing prices, locking up working capital, and delaying payments to farmers.
The diversion has therefore strengthened the sector, not weakened it, and it has had no bearing on the recent price movement, which, as I have said, reflects speculation rather than any shortfall in availability.
The government is targeting 20% ethanol blending with petrol. Do you think this should be stopped considering we have sugar shortage now?
No, the ethanol blended with petrol (EBP) programme should not be halted or reconsidered. India is not experiencing a structural sugar shortage, and the ethanol blending roadmap does not compete with food security or drive domestic price increases.
The Ethanol Blending Programme: A Vital Pillar
Domestic Consumption Comes First: Sugar diversion to ethanol is calculated scientifically at the beginning of each season only after fully securing domestic consumption needs and a comfortable buffer.
Even after diverting roughly 30 lakh tonnes for ethanol in 2025-2026 (in line with the historical 20 lakh to 40 lakh tonne range), India's net sugar production (279 lakh tonnes) comfortably meets demand, leaving a healthy projected closing stock of 35 lakh tonnes.
Diversion Utilises Structural Surplus:
Ethanol diversion converts excess sugar into productive use rather than letting it sit in godowns, where unsold inventory would otherwise depress market prices, lock up mill capital, and cause cane arrears.
Flexible Feedstock Architecture: The blending programme is highly adaptable and no longer depends solely on sugarcane.
The share of sugar-based ethanol has decreased to 25% in 2025 to 2026 (down from >80% in 2021-2022), with grain-based ethanol supplying the majority share.
This flexibility allows the government to recalibrate allocations to safeguard domestic sugar supplies without compromising national blending targets.
Crucial Economic & Ecological Gains: Since 2014, EBP has substituted over 316 lakh metric tonnes of crude imports, saved over ₹1.97 lakh crore in foreign exchange, paid over ₹1.66 lakh crore to farmers, and cut emissions by more than 950 lakh metric tonnes.
It has eliminated the need for mill subsidies since 2021 to 2022 and brought cane arrears to historic lows, with over 97% of 2025 to 2026 cane dues already cleared.
Root Cause of Recent Price Spikes: The recent price firming is not driven by physical supply deficits. It is the result of weather-induced lower yields, seasonal demand, and speculative advance buying/hoarding by bulk consumers ahead of the festive season.
This is already being addressed through targeted stockholding limits and precautionary duty-free import windows.
EBP remains a vital, self-sustaining pillar of national energy security, rural liquidity, and decarbonisation that successfully coexists with stable domestic food availability.
