By Gyan Pathak
Even a cursory glance on the statements made recently by Union Government on the current episode of sharp rise in sugar prices in India is enough to convince us that the Centre’s sugar policy is deeply faulty and anti-people making it unaffordable for poor, apart from inaction in controlling its prices. Despite the government claim of taking steps for controlling its prices, retail sugar prices range in the private market peaked at the ground level on August 25, 2026 across India, ranging between Rs65 to Rs80, though official government data on the Price Monitoring System recorded the national average price at Rs63.05 per kg on August 24-25. Prices have climbed sharply up from Rs48.18 per kg on July 20.
The Union Ministry for consumer affairs, food and public distribution system has attributed the current price rise to “lower-than-expected domestic production, crop damage, tightening global supplies, increased demand ahead of the festive season, and speculation and hoarding by sections of industry”.
Whatever, the ministry has stated, gives a clear idea that the government is fully responsible for the present sugar crisis and sharp rise in prices. It was only on August 21, the ministry had said that sugar production in the current season was expected to be around 30.6 million tonnes much below than the estimated 34.5 million tonnes. The ministry had also given a list of steps it had taken to curb hoarding and boost domestic supplies. However, situation is going bad to worse before the festive season. Sugar prices has risen nearly 40 per cent in two months.
Sugar industry has itself said that there is not genuine physical shortage of sugar and attributed the current steep price hike to speculative buying and stockpiling.
Not only that, around 3 million tonnes of sugar, roughly 10 per cent of entire sugar production of the country, have been diverted to ethanol production.
It is crystal clear that the current crisis is not simply that India has “too little sugar”, but it shows a deeper policy problem. Such as, the government has simultaneously pursued high administered cane prices, ethanol diversion, import protection, and controlled domestic sugar marketing, while consumers are left to bear the burden of the price rise.
Government’s policy is anti-consumer. First, because the government protects the price received by sugarcane growers, but has no equivalent protection for sugar consumers. The official Fair and Remunerative Price (FRP) for sugarcane has risen from Rs230 per quintal in 2016-17 to Rs355 per quintal in 2025-26, which is an increase of about 54.3 per cent. The fault is not in the FRP, because supporting farmers is legitimate. However, the problem lies in the asymmetry: cane prices are administratively protected upward, while the poor consumer has to face the resulting cost through the market.
Secondly, Ethanol policy of India has effectively created competition between petrol and food consumption. The government has been encouraging sugar mills to divert cane/sugar into ethanol to achieve its objective of 20 per cent ethanol blending. This year 3 million tonnes of sugar equivalent went towards ethanol rather than sugar. There is clearly no balance maintained by the government between ethanol and sugar productions, which greatly contributed in the present crisis. Government has prioritized its energy policy objective and did not care for keeping sugar, the everyday food commodity, affordable for poor consumers.
Thirdly, import protection has made it harder for domestic prices to correct quickly. India normally imposes a 100 per cent import duty on sugar. Centre permitted 1 million tonnes of duty-free raw-sugar imports, only after the sugar prices sharply rose to a record high. Government protected the domestic prices when the prices of sugar were low, they liberalized the import only after consumers have already suffered a major price shock.
It is well known that the government controls the sugar market of the country. Hence, the government is responsible for the distortions in the market. Not only that, government also regulates production, sales, exports, imports and even the quantity of sugar the mills can release into the market. It also maintains a minimum selling price framework.
It is in this backdrop the burden of steep price rise has fallen disproportionately on the poor consumers. For a well to do households the price rise is not more than an annoyance but it is a real problem for poor households, because sugar is an input into tea, sweets, festival foods etc. It also affects small food vendors.
Though India recognizes the vulnerability of the sugar price rise, its central sugar subsidy scheme is specifically restricted to Antyodaya Anna Yojna (AAY) families, providing 1 kg of sugar per family per month at Rs18.50 per kg. Barring this section, government’s policy pushes up market price of sugar for everyone.
The current crisis in not the result of one year only. Sugar production has been falling since 2021-22 when the country had produced 35.9 million tonnes, while by 2023-24 it declined to only 32 million. In the current season it is expected to be only around 30.6 million tonne. Centre has just preferred to ignore the mounting crisis, and did not take proper actions in time.
Industry body has attributed the current price rise to “hoarding and advance stocking by some traders” taking large quantities of sugar out of circulation creating an artificial sense of scarcity. Now Centre, has imposed a 400-tonne stock limit on sugar dealers until November 30, restricting bulk consumers to stock equivalent to 15 days of consumption from September 1. Duty free imports of 1 million tonnes of raw sugar has been approved, and government says that fresh production is also likely to begin around mid-October, which will ease the sugar prices. (IPA Service)
