Centre says rise in sugar prices cannot be attributed to ethanol
Sugar prices have risen sharply in recent weeks, increasing from ₹48.18 per kg on July 20, 2026, to ₹55.70 per kg on August 20.
The government firmly denied suggestions that ethanol production is the cause behind the recent rise in sugar prices. In a statement, the Ministry of Consumer Affairs, Food & Public Distribution clarified that the share of sugar diverted for ethanol production has decreased from around 12% in 2022-23 to approximately 9% in 2025-26. Nearly three-quarters of the ethanol now produced in the country comes from grains, particularly maize.
The recent surge in sugar prices, which has increased from ₹48.18 per kg on July 20, 2026, to ₹55.70 per kg on August 20, 2026, is attributed to a mix of factors. These include lower-than-expected domestic sugar production, heightened demand ahead of the festive season, damage to sugarcane crops due to adverse weather conditions, restricted global sugar supplies, and speculative hoarding by certain industry stakeholders.
The price increase is also part of a broader global trend, with tightening supplies impacting sugar markets worldwide. The global sugar deficit for 2026-27 is projected at around 33 LMT, while weather-related concerns have further exacerbated the situation. International sugar prices have risen from $474 per tonne on June 30, 2026, to $552 per tonne on August 20, 2026, showing an increase of over 16% in less than two months.
Defending the ethanol program, the government argued that it has mitigated the issue of surplus sugar production and enhanced the financial standing of sugar mills. India typically generates 320-340 LMT of sugar annually, compared to domestic consumption of 280-290 LMT. In surplus years, excess stocks can tie up funds with mills and delay payments to sugarcane farmers.
Diverting surplus sugar to ethanol has helped alleviate this structural problem, with 97% of sugarcane dues for the 2025-26 season already paid to farmers as of August 20, 2026. The government also noted that improved financial health of mills has reduced their dependence on government support, with subsidies for the sugar industry shrinking from ₹14,600 crore between 2014 and 2021 to none since 2021-22.
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