Atmanirbharta in fuel must strengthen, not undermine, India’s food security

Sugar prices have surged by nearly 44 per cent within a month, reaching around Rs 65/kg from Rs 45/kg. The government has accused traders and mills of hoarding and threatened stern action. Three supply-side factors appear to have triggered a perfect storm. Firstly, opening stocks for the current sugar year were significantly lower compared to the previous year, reflecting weak production and limited capacity to absorb supply shocks.

Secondly, sugar production for 2025-26 fell short of expectations due to damage from red rot and top borer. Thirdly, ethanol blending has outpaced supply, causing a diversion of sugar even when stocks were tight. The festive season, when demand for sugar typically rises, adds further pressure to an already tight supply situation.

India's sugar sector remains heavily regulated, with pricing, sales, imports, exports, and ethanol feedstock allocation under government control. This heavy regulation means that any production shortfall in sugar will likely result in a spike in prices under the government's watch. The government's current response - allowing duty-free raw sugar imports - is considered insufficient and too late.

Instead, it is suggested that the government should import at least 3-4 MT of refined sugar and increase the supply of sugar in the open market before and during the festive season.

To alleviate the pressure on sugar prices, there should be a temporary shift in ethanol feedstock mix, reducing the use of sugar-based ethanol and increasing the use of alternative feedstocks. The government can also tap into its existing rice stocks to provide ethanol instead of sugar. However, maize is considered the best option due to its lower water usage compared to rice and sugarcane. Although maize production has been increasing, its productivity levels remain low, and further boosting its productivity is crucial.

The ethanol programme needs to be reviewed and recalibrated. While shifting ethanol blending from sugar to rice or maize does not eliminate the food-fuel trade-off, raising maize productivity is essential. The government should focus on strategic buffers and food-security safeguards rather than micromanaging every feedstock allocation.

The immediate response should be to bring in enough sugar to rebuild stock cushions, temporarily shift ethanol away from sugar, use FCI grain only when there is genuine surplus, and retain imported ethanol as a safety valve. Shifting to maize-based ethanol would save water and be more environmentally friendly. Overall, the priority must remain food security, with fuel self-reliance strengthening, not undermining, India's food security.