Govt denies ethanol diversion caused sugar prices to rise, points to lower output and festive demand

The government on Friday (August 21) rejected claims that the recent rise in sugar prices was driven by the diversion of sugar for ethanol production, saying the reasons for the increase lie elsewhere.The clarification comes as sugar prices have risen from ₹48.18 per kg on July 20 to ₹55.70 per kg on August 20, with the government saying it is monitoring prices and availability ahead of the festive season. Ethanol diversion has declinedThe government said the share of sugar diverted for ethanol has fallen to around 9% in 2025-26 from around 12% in 2022-23. Nearly three-fourths of ethanol produced in India now comes from grains, particularly maize.It said the current increase in sugar prices instead reflects a combination of factors, including lower-than-expected domestic production, higher demand ahead of the festive season, weather-related damage to sugarcane, tighter global supplies, and speculation and hoarding by some sections of the industry.Sugar production for the current season is now expected at around 306 lakh metric tonnes (LMT), against an initial estimate of about 343 LMT by sugarcane-growing states. The government attributed the shortfall to Red Rot and Top Borer disease in sugarcane, along with waterlogging caused by excess rainfall. Also read: Cars for all Tamil Nadu MLAs? DMK rejects offer, questions need for spending Global supplies also tightenThe government said the pressure on sugar prices is not limited to India, with the global sugar market expected to face a deficit of around 33 LMT in 2026-27.International sugar prices have risen from $474 per tonne on June 30 to $552 per tonne on August 20, an increase of more than 16%.Despite the lower domestic production estimate, the government said sugar stocks remain sufficient to meet domestic demand until the new crushing season begins in October.The notification comes a day after the government announced its measures to curb hoarding and increase availability include stock limits on dealers, physical verification of sugar stocks and duty-free imports of 10 LMT of raw sugar.First Published: Aug 21, 2026 6:19 PM IST

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