The government, on Friday, said Red Rot and Top Borer disease, coupled with waterlogging, caused a downward revision of domestic sugar production estimates by more than 10 per cent this season, from an initial estimate of 34.3 million metric tonnes (mmt) to around 30.6 mmt recently. The revision led to a nationwide uptick in sugar prices to record levels and reported supply constraints.
Sugar spot prices rose to a 16-year high of over Rs 5,300 per quintal in the benchmark Kolhapur market for medium grade on August 19 due to a supply crunch. The relentless rise in prices since March 2026 has not only prompted the government to clamp down on hoarding but also to permit the import of 1 mmt of duty-free sugar for the first time in nearly a decade.
In the statement issued today, the government denied recent reports linking the diversion of sugar for ethanol to supply shortfalls and price rises.
Normally, India has had a surplus of sugar, with 32-34 mmt produced annually, against domestic consumption of around 28-29 mmt.
Part of this excess produce is diverted to ethanol — around 9 per cent of sugar produced in 2025-26, a dip from 12 per cent in 2022-23. The government said this diversion helped improve the financial health of sugar mills, with 97 per cent of dues for the 2025-26 season paid to farmers.
Meanwhile, the National Federation of Cooperative Sugar Federation (NFCSF), which is the apex association of cooperative sugar mills, on Friday sought a minimum sale price of Rs 43 per kg from the government, stating that the average price realisation for mills per kg of sugar is Rs 40, lower than input costs of Rs 43 per kg, along with concessions to ease liquidity issues.
The federation also dismissed any link between ethanol diversion and sugar prices, stating that around 28 per cent of ethanol supply can be linked to the sugar industry, down from 86 per cent earlier.
The ministry, in its statement, also said that no subsidy has been announced for the sugar industry since 2020-21, while consumer sugar prices have increased by around 3 per cent annually between August 2024 and July 2026.
It noted that domestic sugar prices stood at Rs 55.70 per kg on August 20, up from Rs 48.18 per kg a month earlier, a monthly uptick of around 15 per cent. Similarly, international prices also increased by over 16 per cent in less than two months.
While the months from August to November usually see price rises due to festive-driven demand, the government cited weather-related damage to the sugarcane crop, tightening global supplies, and speculation and hoarding by some sections of the industry.
The federation, while conveying its support for the government measures, said advancing crushing to October may lead to a 2-3 per cent drop in recovery for the mills. It sought concessions from the government, including a GST waiver on produce sold in the months of October and November, along with soft loans to ease liquidity issues facing mills.
The ministry said that adequate sugar stocks are available to meet domestic demand before the new crushing season in October.
