Centre rejects ethanol diversion link to sugar price rise, warns mills against profiteering

Notably, the Centre on Friday rejected claims that diversion of sugar for ethanol production was driving a sharp rise in sugar rates, instead blaming the industry for raising costs despite adequate stocks to meet domestic demand.

Key points

• Chopra remarked India had adequate sugar stocks despite production falling to 306 lakh tonnes in the 2025-26 marketing year, from an earlier estimate of 343 lakh tonnes.
• Chopra remarked India was anticipated to have a closing sugar stock of 33-35 lakh tonnes by the end of September 2026.
• The all-India average retail cost of sugar has risen to Rs 56 per kg from Rs 48 per kg on July 20.
• The diversion in 2022-23 accounted for regarding 12 per cent of total sugar stocks, he stated.
• While preparing mills for an early start to the crushing season around October 15, the administration has asked sugar-producing States to crack down on hoarding, black marketing and speculation.

While preparing mills for an early start to the crushing season around October 15, the administration has asked sugar-producing States to crack down on hoarding, black marketing and speculation. It is additionally considering tightening the stock-holding limit for dealers.

Briefing the media on sugar availability and rates, Food Secretary Sanjeev Chopra stated the administration had taken precautionary measures, including approving duty-free imports of 10 lakh tonnes of raw sugar by October 31 and imposing stock limits on dealers and bulk consumers such as soft-drink and ice-cream manufacturers.

Chopra remarked India had adequate sugar stocks despite production falling to 306 lakh tonnes in the 2025-26 marketing year, from an earlier estimate of 343 lakh tonnes. The decline was attributed mainly to pest and disease attacks on sugarcane crops and waterlogging caused by excessive rainfall. Annual domestic sugar consumption is estimated at 280-285 lakh tonnes.

For context, the all-India average retail cost of sugar has risen to Rs 56 per kg from Rs 48 per kg on July 20. Ex-mill rates have climbed even more sharply, climbing from Rs 47-48 per kg to Rs 62 per kg previously seven to 10 days.

Calling the growth "unjustified", Chopra stated he had summoned representatives of industry bodies, the Indian Sugar and Bio-energy Manufacturers Association (ISMA) and the National Federation of Cooperative Sugar Factories (NFCSF), and conveyed that the sudden growth was "not acceptable".

"We have always been assisting the sugar sector, and we expect that they will not take advantage of these situations to the detriment of the consumers of the country, " he remarked.

Rejecting the argument that ethanol production was responsible for the recent cost rise, Chopra noted only 28 lakh tonnes of sugar had been diverted for ethanol in the current marketing season, compared with almost 43 lakh tonnes in 2022-23.

For context, the diversion in 2022-23 accounted for regarding 12 per cent of total sugar stocks, he stated. At present, only concerning one-fourth of ethanol is produced from sugar, with the rest coming mainly from grains such as maize.

"Some of the stakeholders are trying to create the impression that the sugar prices have gone up only because of ethanol diversion, which is completely baseless, " Chopra remarked.

He continued that ethanol diversification had strengthened the financial health of the sugar industry and assisted mills create timely payments to farmers.

Chopra remarked India was anticipated to have a closing sugar stock of 33-35 lakh tonnes by the end of September 2026. With mills projected to commence crushing early, around October 15, another 10-12 lakh tonnes of sugar could become available during October.

"This will ensure that the availability will be more than adequate to cater to the domestic requirements, " he remarked.

As an extra precaution, the administration has approved duty-free imports of around 10 lakh tonnes of raw sugar. Refineries that imported raw sugar under the advance authorisation scheme have additionally been permitted to transfer their stocks for domestic sale, potentially adding another 3-4 lakh tonnes to immediate market availability.

"There is no justification for some of these players in the sugar sector to have hiked the prices, " Chopra remarked.

For context, the administration has additionally triggered concern that some mills are showing stocks as sold on paper without physically releasing the sugar into the market, creating an artificial shortage. Chopra remarked mills had been instructed to ensure that quantities sold actually reach the market.

For context, the Centre has asked major sugar-producing States to prepare for the early start of crushing and take strict action against hoarders, black marketers and speculators.

In practice, the administration is considering reducing the current stock-holding limit of 400 tonnes for dealers. From September 1, bulk consumers will additionally be prohibited from holding sugar stocks exceeding 15 days of their consumption.

Chopra acknowledged that the measure could cause some inconvenience to bulk users but remarked it was necessary to prevent unnecessary stockpiling when supplies remained adequate.

Meanwhile, the Food Secretary assured consumers that there would be no shortage of sugar during the upcoming festive season or beyond, saying the administration would take all necessary measures to protect the interests of both farmers and consumers.

For now, centre rejects ethanol diversion link to sugar price rise, warns mills against remains the part of the story worth watching, and further updates are likely as more details are confirmed.