The government on Friday rejected claims that diversion of sugar for ethanol production was behind the sharp rise in sugar prices, saying there was no shortage in the country and that mills had increased prices without justification.
Food Secretary Sanjeev Chopra said India has sufficient stocks to meet domestic demand despite lower production in the 2025-26 marketing year. The government has asked sugar-producing states to act against hoarders, black marketers and speculators, while preparing for an early start to the crushing season around October 15.
Mills Under Scanner
The government's stand puts the focus firmly on sugar mills and other market players. Chopra said ex-mill sugar prices had jumped from ₹47-48 per kg to ₹62 per kg in about seven to 10 days, a rise he described as completely unjustified.
Retail consumers have also felt the impact. The all-India average retail price of sugar has risen from ₹48 per kg on July 20 to ₹56 per kg.
Chopra said he met representatives of the Indian Sugar and Bio-energy Manufacturers Association (ISMA) and the National Federation of Cooperative Sugar Factories (NFCSF) on Friday and made it clear that the sudden increase in ex-mill prices was "not acceptable".
"It is incorrect to attribute the recent increase in sugar prices to diversion of sugar for ethanol production," Chopra said.
According to him, only 28 lakh tonnes of sugar have been diverted for ethanol production in the current 2025-26 marketing season. Sugar now accounts for only one-fourth of ethanol production, with the rest coming from grains, mainly maize.
The government believes diversification into ethanol has instead strengthened the financial health of the sugar sector and helped mills make timely payments to farmers.
Enough Sugar, Govt Says
Sugar production has fallen to 306 lakh tonnes in the 2025-26 marketing year, which runs from October to September, against an earlier estimate of 343 lakh tonnes. Annual domestic demand stands at around 280-285 lakh tonnes.
Chopra attributed the decline in production to red rot and top borer disease in sugarcane, along with waterlogging caused by excess rainfall.
Despite the lower output, he said there were "ample and adequate" stocks and no fundamental reason for the recent price surge.
"There is no reason for any of these stakeholders to take advantage of this kind of a position. Profiteer, hoard, speculate, and create the impression that the country has no sugar in stock," Chopra said.
India is expected to have closing stocks of 33-35 lakh tonnes at the end of September 2026.
Early Crushing To Boost Supply
The government expects sugar mills to begin crushing early this year, around October 15. Chopra said the early start could make an additional 10-12 lakh tonnes of sugar available during October, helping the country comfortably meet domestic requirements.
As a precaution, the government has also approved duty-free imports of about 10 lakh tonnes of raw sugar by October 31.
Sugar refineries that imported raw sugar under the advance authorisation scheme have also been allowed to transfer their stocks for domestic sale. The move is expected to immediately add another three to four lakh tonnes to supplies, PTI reports.
The combination of imports, additional domestic stocks and early crushing gives the government confidence that supply will remain comfortable. It also strengthens its argument that the recent price rise cannot be explained by an actual shortage.
"These are all additional steps taken as a matter of abundant precaution. There is no justification for some of these players in the sugar sector to have hiked the prices. We are in fact aware," Chopra said.
Crackdown On Hoarding
The Centre has asked major sugar-producing states to prepare for early crushing and take strict action against black marketers, hoarders and speculators.
The government is also considering tightening the stock-holding limit for dealers, which currently stands at 400 tonnes.
Chopra said physical verification had revealed instances where some sugar mills were selling stocks only on paper without physically releasing the sugar into the market.
"We found in the physical verification that, just to create artificial scarcity, some sugar mills are selling the stocks, but only on paper; they're not selling it physically," he said.
The government has directed mills to ensure that once a quantity is sold, it is physically released into the market for consumption by the end user.
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Bulk Buyers Face New Limit
The government has also imposed restrictions on bulk consumers such as soft-drink and ice-cream manufacturers. From Sept 1, they will not be allowed to hold stocks exceeding 15 days of consumption.
Chopra acknowledged that the restriction could cause some inconvenience to bulk users but said the measure was necessary when some market participants were holding stocks despite adequate availability.
The government's measures signal that it sees the current problem less as one of overall sugar availability and more as one of how stocks are being held and released into the market. The coming weeks will show whether tighter stock limits and action against hoarding are enough to bring prices down.
Following the measures already announced, Chopra said retail sugar prices were expected to decline in the coming days.
He also assured consumers that there would be no problem with sugar availability during the festive season and beyond.
