Not ethanol, but low output, festive demand behind sugar price hike: Centre

India's government has refuted claims that the diversion of sugar for ethanol production is the primary driver behind the recent price surge. Instead, officials point to a combination of factors including lower-than-expected domestic output, heightened demand during the festive season, and crop damage caused by adverse weather conditions. This explanation comes as average retail sugar prices climbed from ₹48.18 per kg in late July to ₹58.20 per kg by late August, according to data from the consumer affairs ministry.

To stabilize the market and ensure availability ahead of the crucial festive period, the government is implementing measures to prevent hoarding and has authorized sugar imports. This marks the first time in nearly a decade that the country will allow sugar imports. The government also stated that the proportion of sugar diverted for ethanol production has decreased, falling from approximately 12% in the 2022-23 season to an estimated 9% in 2025-26, with a significant portion of current ethanol output coming from grains like maize.

Domestic sugar production for the current season is now projected to be around 30.6 million tonnes, a notable decrease from the initial estimate of 34.35 million tonnes. The shortfall is attributed to diseases such as red rot and top borer affecting sugarcane crops, compounded by waterlogging from excessive rainfall. These challenges have impacted the overall yield and contributed to the tighter domestic supply, fueling the price increase.