Shopping for a packet of sugar in any of the most important metros right now will set you again by roughly 40% greater than a fortnight in the past. The rationale: A extreme provide crunch. This has prompted the federal government to fortify sugar shops on the onset of the festive season which historically begins with Onam and Rakshabandhan in August.
India went from a potential glut, to a critical dearth of sugar in a 12 months.
Initially of this sugar season (October 1, 2025; it ends on September 30, 2026), the federal government and the trade ready for a surplus. Sugar manufacturing was anticipated to rise sharply, diversion to provide ethanol was anticipated to be decrease, and mills have been urgent for permission to export extra sugar to forestall shares and dues to cane farmers from piling up.
Trade physique Indian Sugar and Bio-energy Producers Affiliation (ISMA), anticipated sugar output at 34.90 million tonnes (MT) in its first preliminary estimate launched in July 2025 for the 2025-26 season. This represented a 18.3% year-on-year enhance from 29.6 MT the 12 months earlier than. This was reiterated at its annual convention in September.
Primarily based on the estimate, the federal government allowed the trade to export sugar earlier within the season. This was starkly totally different from the 12 months earlier than. Within the 2024-25 season, the federal government had allowed 1 million tonnes of exports solely in January 2025, whereas for the present season it accredited an preliminary 1.5 million tonnes in November 2025, quickly after the season started . It allowed export of one other 500,000 tonnes in February.
However by Could, projections modified and the coverage took a U-turn.
The federal government in Could banned sugar exports till September 30, citing the necessity to protect home provides. By July, it was tightening controls on mills and sellers, and in August it stored the month-to-month gross sales quota at 2.25 million tonnes — unchanged from a 12 months earlier — although the market anticipated 2.30-2.40 MT as a result of the pageant season was approaching.
Sugar costs responded sharply.
Ex-mill costs in Maharashtra and Uttar Pradesh which had been rising since late June, touched ₹4,880-4,980 per 100kg within the first week of August. Costs then touched a file ₹5,350 per 100kg, August 18. A day later, ex-mill costs of sugar in Uttar Pradesh have been ₹5,850 , up from ₹4,830 per 100kg every week in the past.
Reacting to the sudden, steep rise, the federal government, late on August 19 additional tightened sugar stockholding limits, limiting giant industrial consumers from holding greater than 15 days of their requirement from September. It then went on to open imports of sugar for the primary time in practically a decade, scrapping the 100% import tariff, and permitting 1 MT of sugar imports on August 20. That day, costs shot as much as as excessive as ₹7,100 per 100kg in mills in Karnataka.
What occurred? “How is it {that a} market that was anticipated to have sufficient sugar to allow exports and divert for ethanol, moved so rapidly in direction of a scenario the place the federal government is even apprehensive about releasing the next quota?,” a dealer with a world commodities agency requested, requesting anonymity.
How surplus turned to deficit
The sugar 12 months’s timeline tells the story.
ISMA lower its gross sugar manufacturing estimate barely in November, to 34.35 MT.
Of this, about 3.4 MT was anticipated to be diverted for ethanol manufacturing, leaving internet sugar manufacturing of 31 MT for meals use. With opening shares of about 5 MT, complete sugar availability was projected at practically 36 MT, towards home consumption of about 28.5 MT, leaving a cushty surplus that ISMA mentioned might assist exports of no less than 2 MT.
Nonetheless, manufacturing estimates stored weakening.
In February, ISMA lower its gross manufacturing estimate to 32.4 MT. This discount is equal to a month of the nation’s complete sugar consumption. The trade physique additionally diminished its estimate of internet sugar manufacturing (the gross much less the diversion) to 29.3MT and anticipated about 3.1MT of sugar equal to be diverted in direction of ethanol.
In April, the gross manufacturing estimate was lower once more to 32MT.
The federal government now tasks output for the continuing season at 30.6MT. With 2.9MT diverted for ethanol and 800,000 tonnes exported, the leftover steadiness for the nation stands at 26.9 MT, beneath the consumption estimate of 28.5 MT. Nonetheless, buffer shares from final 12 months will enhance availability until finish of season.
A lot earlier than ISMA’s April estimates, one other sugar physique, the All India Sugar Commerce Affiliation (AISTA) , within the first week of March, sharply diminished its internet sugar manufacturing forecast for the 2025–26 season to twenty-eight.3 MT (excluding sugar for diversion). It mentioned decrease yields in Maharashtra and Karnataka, two of India’s largest producing states, have been chargeable for the downgrade.
“The federal government has understandably relied on trade our bodies reminiscent of ISMA for manufacturing assessments, given their shut visibility of the sector. Nonetheless, their repeated revisions in sugar and cane estimates over current years recommend each official and trade forecasting programs have to be extra sturdy. Inaccurate assessments have influenced main coverage choices with penalties for customers, home commerce and India’s credibility in international markets,” mentioned Deepak Pareek, founder HnyB, an agri advisory.
In a press convention on Monday, ISMA defended its estimates stating that the primary estimates are solely preliminary and are revised because the season progresses. “These revisions are made foundation yields, restoration and so on,” Director Normal Deepak Ballani mentioned.
ISMA’s manufacturing estimates have repeatedly proved too optimistic. In every of the previous 4 sugar seasons, its first estimate was considerably larger than the eventual output. That historical past issues as a result of the federal government’s determination to permit exports was based mostly on projections of comfy availability that modified considerably because the seasons progressed.
To make certain, the federal government has denied that it goes by trade estimates. The division of meals and public distribution mentioned: “Sugar manufacturing estimates utilized by the federal government are based mostly on inputs obtained from the Cane Commissioners/Sugar Commissioners/Sugar Directorate of the sugarcane-producing States. Trade estimates are usually not the premise of the Authorities’s manufacturing forecast or coverage choices.”
“The lower-than-initially-estimated manufacturing within the present season is because of crop and weather-related components, together with Purple Rot and Prime Borer illness and waterlogging brought on by extra rainfall in Maharashtra. Regardless of the decrease manufacturing, enough sugar shares can be found to fulfill home necessities till the graduation of the brand new crushing season in October,” it added.
Additionally learn: Not ethanol, but low output, festive demand behind sugar price hike: Centre
Ethanol paradox
Ethanol coverage is a vital a part of this story because it determines how a lot of the sugarcane crop truly goes to sugar.
Initially of the 2025-26 sugar season, the ethanol programme was anticipated to soak up significantly extra sugar than it in the end did. Trade anticipated 4.5-5MT of sugar equal to be diverted to ethanol. However oil advertising and marketing firms allotted solely 2.9 billion litres of ethanol from sugar-based feedstocks for the 2025-26 ethanol provide 12 months.
ISMA had earlier estimated that round 3.2-3.4MT of sugar could be diverted to ethanol manufacturing. The precise diversion in 2025-26 is now estimated at round 3MT, which means much less sugar was taken out of the meals marketplace for ethanol than initially anticipated.
This issues as a result of much less sugar going into ethanol ought to imply extra sugar being obtainable for the home market. Nonetheless, as manufacturing numbers modified, even the decrease quantity felt greater than what ought to have been allowed.
To make certain, India started mixing ethanol in petrol to cut back its gas import payments. With sugar costs at file highs, the mixing from sugarcane is more likely to cease for the rest of this 12 months in addition to for the following 12 months, owing to produce worries that spill onto the latter.
The federal government has maintained that ethanol didn’t result in this worth spike. In a press release launched on August 21, it mentioned the current surge in sugar costs can’t be attributed to the diversion of sugar for ethanol, pointing as an alternative to lower-than-expected home manufacturing, larger festive-season demand, and weather-related crop injury.
“The current enhance in sugar costs is attributable to a mix of things, together with lower-than-expected manufacturing, elevated festive demand, weather-related crop injury, international provide circumstances and market behaviour. It can’t be attributed to ethanol diversion. The share of sugar diverted for ethanol has, the truth is, declined from round 12% in 2022-23 to round 9% in 2025-26, whereas practically three-fourths of ethanol manufacturing now comes from grains, notably maize.”
When have been sugar costs final this excessive?
Sugar costs have by no means reached the highs witnessed this 12 months. On this century, solely two main episodes of tight home sugar provides have been seen– first in 2009-10 after which in 2016-17.
In February 2017, wholesale sugar costs in key markets reached ₹4,080-4,180 per 100 kg. Market members on the time cited tight shares, sturdy bulk demand, speculative shopping for and decrease manufacturing estimates.
In an identical scenario, ex-mill costs in 2009 touched ₹4,400 per 100 kg in key markets owing to a fall in acreage after bumper crop in 2007-08 disillusioned farmers and the monsoon failed in 2009.
Closing shares plunged to a vital low of three.22MT. India was pressured to import over 4MT of uncooked sugar, driving international costs to 30-year highs.
Additionally learn: Maharashtra teams to verify sugar stocks at mills, traders amid suspected hoarding
Outlook for the following season
Closing shares are the amount of sugar left unsold and obtainable on the finish of a sugar season, after accounting for manufacturing, imports, home consumption, exports and different makes use of reminiscent of ethanol diversion.
That closing inventory then turns into the opening inventory for the next season. So if India ends a season with unusually low shares, it begins the following season with a smaller buffer towards a poor crop or unexpectedly sturdy demand.
Trade estimates recommend India’s carry-over shares might fall to round 3.2 million tonnes, the bottom stage in practically 20 years. On the identical time, the sugarcane crop that may decide subsequent 12 months’s production– sown within the ongoing kharif (monsoon crop) season– is already dealing with productiveness issues in essential states of the nation as a strengthening El Nino is growing the danger of hotter and drier circumstances. Sugarcane wants intermittent rains to have a wholesome yield.
“Maharashtra and Karnataka account for nearly 50% of the variability in nationwide sugar manufacturing. Fluctuating rainfall and important deficits in some components of Maharashtra, very low reservoir ranges in Karnataka and rainfall deficiency in jap Uttar Pradesh and Bihar are all issues. With (climate forecaster) Skymet additionally forecasting a rainfall deficit in September, we might see about 2 million tonnes much less sucrose manufacturing in 2026-27 than this season,” mentioned GK Sood, chairman of KN Agri Sources Ltd.
Sood mentioned such an end result would go away manufacturing at barely sufficient to fulfill annual consumption of round 29 million tonnes. “If output matches this 12 months’s 31 million tonnes, it could be prudent to construct extra shares, as a result of the present stock-to-use ratio of about 11% is already uncomfortable and fewer than the 14% seen throughout 2008-09 when shares fell that low,” he mentioned. With opening shares low, India imported as a lot as 5 MT of sugar in 2009-10, in accordance with a Reuters report. Inventory-to-use ration refers to how a lot sugar is left in inventory relative to annual home consumption.
Based on preliminary trade estimates, sugar output for the following 12 months 2026-27 could also be even decrease, at 29 million tonnes.
In a response to HT’s queries, the division of meals and public distribution in a press release mentioned, “The federal government will proceed to intently monitor sugar availability, costs and market practices and take additional measures, as needed, to guard customers whereas safeguarding the pursuits of sugarcane farmers,” the assertion added.
