Why prices hit a 9-year high?
Uttar Pradesh at Rs 62.5-64, Maharashtra at Rs 63-64, Karnataka at Rs 63-64. On August 20, India's retail sugar prices were at their lowest in nine years in terms of stocks, and highest in terms of price panic.
The correlation is direct. ISMA estimated 2024-25 production at 343.5 lakh tonnes, net 309.5 lt after 34 lt diversion to ethanol. Latest estimates put gross at 309 lt and diversion at 30 lt, net at 279 lt — 30.5 lt below initial projection. Opening stocks of just 50 lt meant only 329 lt available. Minus domestic consumption of 280 lt and 8 lt exports, closing stocks would be around 41 lt — the lowest since 2016-17's 39.41 lt.Why projections failed? The sugarcane crop in Maharashtra, Karnataka and Gujarat suffered excess rainfall in September-October last year, with delayed monsoon withdrawal. Waterlogged fields, lack of sunshine, deprived standing crop of aeration and daylight. It hit growth and sucrose accumulation, cutting yields and recovery.
ISMA in November had projected Maharashtra and Karnataka at 130 lt and 63.5 lt, but they produced only 99.2 lt and 47.2 lt. UP also dropped from 103.2 lt to 98.7 lt, hit by red rot and top shoot borer, especially in dominant Co-0238 variety.
How much is ethanol to blame? Of 810.67 crore litres ethanol supplied to OMCs from Nov 2024 to July 2026, only 259.24 crore litres or 32% came from sugarcane-based feedstock. 551.43 crore litres or 68% came from grain-based distilleries. Linking spiralling sugar price to ethanol diversion is "clearly an exaggeration," says industry.
Two triggers fired the price.
First, unexpected shortfall and low stocks lying with mills. Some liquidity-strapped mills had already sold beyond monthly quotas and had no sugar left on paper.
Second, monsoon panic — June deficiency convinced trade that 2026-27 would also be low, triggering stockpiling and refusal to sell.
Government acted: banned exports till Sept 30, 2026, allowed duty-free import of 10 lt raw sugar till Oct 31, imposed stock limit of 400 tonnes on dealers, and on August 13 ordered bulk consumers to disclose stocks.
But the core lesson: sugar economics is no longer just about sugar. It's about climate, ethanol policy, and market psychology — all sweetening the price.