Sugar prices in India have climbed to record levels. In Maharashtra, ex-factory sugar prices have climbed to about Rs 5,300 per quintal, and when GST is added, the cost is reaching approximately Rs 5,550-5,600 per quintal.
In Uttar Pradesh, M-grade sugar reached an ex-factory price of Rs 5,400 per quintal on August 18, with an additional 5% GST levied on top of this price.
Over the past month, Indian sugar prices have surged by about 10% to reach record levels, fueled by shrinking supplies and increasing demand in the run-up to the festive season.
This steep increase is anticipated to persist in the near future, heightening the Centre’s worries about domestic sugar availability and price levels.
Despite lower production, sugar exports and the diversion of sugarcane-based feedstock toward ethanol production are expected to push closing stocks at the end of the current sugar season to a record low. The tightening supply situation is already being reflected in domestic prices.
ICRA projects that gross sugar production in the 2025–26 will be about 31.1 million tonnes. However, approximately 3.1 million tonnes may be diverted for ethanol manufacturing, resulting in net sugar output of roughly 28 million tonnes.
Domestic sugar consumption is projected to be about 28.3 million tonnes, while India has already shipped roughly 0.7 million tonnes in exports during the current season.
This indicates that current production by itself cannot meet both domestic demand and export requirements, so the shortfall must be supplied from existing inventories.
The situation becomes more important when we look at inventories.
ICRA anticipates that closing sugar inventories will decline to about 4.3 million tonnes by September 2026, down from roughly 5.3 million tonnes in the previous year.
That amounts to roughly two months of domestic consumption. So, while India is not facing a sugar shortage, the buffer stock in the system has dwindled.
Sugar Prices rose by 32% in Two Months. Wholesale sugar prices have climbed from about Rs 4,400 per quintal two months ago to nearly Rs 5,800 per quintal at present, marking an increase of roughly 32%.
This steep rise, uncommon in recent years, signals mounting worries about the adequacy of sugar supplies.
Sugar demand usually increases from August to November, driven by higher consumption during the festive season.
Major buyers, such as biscuit makers, confectionery companies, and beverage producers, usually build up their inventories ahead of this period.
When this surge in demand overlaps with already declining stock levels, prices can rise sharply. That appears to be exactly what is happening now.
Patchy rains and dry weather conditions have hit the sugarcane crop, which typically requires copious amounts of water for irrigation
Sources linked to the sugar trade report that traders and intermediaries started stockpiling supplies after the government set a cap of 4,000 quintals per dealer.
Instead of stabilising prices, this measure has contributed to driving prices up. Market participants had anticipated a possible shortage and appear to have adjusted their inventory and trading strategies accordingly.
Indian sugar prices have already risen around 10% in one month, and expectations that supplies will remain tight are keeping prices elevated.
For sugar companies, higher sugar prices can translate into better realizations on every tonne of sugar sold. This is one reason sugar stocks have reacted positively.
Ethanol has emerged as one of the most significant structural shifts in India’s sugar sector.
Through the Ethanol Blended Petrol (EDB) programme, sugar mills are allowed to divert sugarcane and sugar-derived feedstock into ethanol production rather than focusing solely on sugar output.
India achieved approximately 19.24% ethanol blending in the Ethanol Supply Year 2024–25, while the government has set a target of 20% blending for 2025–26.
Ethanol production capacity has also risen significantly, reaching about 1,953 crore litres by October 2025.
This has opened up an additional revenue stream for sugar mills, and the volume of sugar redirected for ethanol production has also been significant.
Rising sugar prices may benefit sugar mills, but they do not necessarily favor consumers. As sugar is a widely used food staple, a steep price increase can help drive overall food inflation.
The government had previously set stockholding limits for sugar traders from August 1 to November 30, 2026, aiming to deter hoarding and enhance supply availability.
It has further strengthened these regulations. Dealers managing over 10 metric tonnes of sugar each month are now restricted to holding inventory equivalent to roughly 15 days of supply.
India is weighing steps to strengthen sugar availability and curb record-high prices, including restricted duty-free imports and limits on stockpiles held by bulk traders, which could open the door to foreign shipments for the first time in almost ten years.
Industry projections indicate that India’s closing sugar inventory may decline to about 3–3.3 million tonnes by September 30, 2026, marking the end of the current season.
If this materialises, it would rank among the lowest closing stock levels in many decades. Such a small carryover could further strain sugar availability during the first two months of the 2026–27 season, before new production becomes available in substantial volumes.
The Centre ordered an on-site inspection of sugar stocks at mills on July 24, with the process scheduled to be finished by August 14. However, despite the completion of this verification, the government has yet to publish the related sugar inventory figures.
Publishing official stock figures could help curb market speculation by offering clearer insight into the real supply of sugar. With prices already at historic highs, the government’s evaluation of inventories and its subsequent policy actions will be crucial in shaping the market’s trajectory in the week ahead.
