Bitter harvest

Sugar is turning bitter ahead of the festival season, with the retail price rising from ₹48.18 a kg on July 20 to ₹55.70 on August 20, a 16 per cent increase in a month. The Centre has allowed duty-free imports of 1 million tonnes of raw sugar till October 31, while imposing stock limits and monitoring mills and traders. The intervention is necessary, but its effectiveness will depend on how quickly imported sugar reaches consumers. Raw sugar has to be refined before it can enter the retail market, and shipments from Brazil, for instance, can take 40-45 days. The government has now also given importers a two-month window from the filing of the Bill of Entry to process and sell the refined sugar, rather than requiring sales by October 31. This is a sensible adjustment, but with domestic ex-mill prices falling, industry estimates suggest only about half the permitted quantity may be imported. 

The problem is tighter supply. Sugar production for the current season is expected to be 30.6 million tonnes, nearly 11 per cent below the initial estimate of around 34.3 million tonnes. Excessive rain and waterlogging damaged the crop in Maharashtra and Karnataka, while red rot and top-borer disease did the harm in Uttar Pradesh. The scale of the downward revision points to a weakness in India’s sugar-supply management, particularly the difficulty of forecasting sugar output accurately as weather conditions become more volatile. The government says stocks are sufficient to meet domestic demand until the new crushing season begins in October, but the sharp price rise shows how sensitive the market has become to expectations about availability. The global market is adding to the pressure. The worldwide sugar market is estimated to face a deficit of around 3.3 million tonnes in 2026-27, and international sugar prices have risen over 16 per cent since June. 

While ethanol diversion has reduced sugar available for consumption, blaming the biofuel programme alone would be misplaced because sugar used for ethanol production has fallen from about 12 per cent in 2022-23 to 9 per cent in 2025-26. Nearly three-fourths of India’s ethanol now comes from grain feedstock. Ethanol has also helped improve the financial position of sugar mills by providing an alternative outlet for surplus sugar and supporting timely payments to farmers. As of August 20, about 97 per cent of sugarcane dues for the 2025-26 season had reportedly been paid. 

Nevertheless, the idea of diverting sugarcane for ethanol production in a water-stressed country must be revaluated. Public policy should distinguish between using surplus sugar for ethanol and encouraging additional water-intensive cane cultivation. The latter deserves greater scrutiny, particularly when climate variability is already making production less predictable. The immediate priority now should be to ensure imported sugar reaches the market quickly. Stock limits and the physical verification of inventories should remain targeted at preventing artificial scarcity without disrupting legitimate trade. The government should also closely monitor whether importers are bringing in the permitted quantity and whether the benefits are being passed through to consumers. Over time, India will need better crop forecasting, disease-resistant cane, and greater diversification towards maize-based ethanol. More reliable estimates of production and stocks would also allow export and import decisions to be taken earlier, reducing the need for abrupt policy reversals.